1 Thursday, 7 September 2017 2 (9.30 am) 3 MR DONALD ANDERSON (continued) 4 CHAIR OF THE INQUIRY: Good morning. Good morning, 5 Mr Anderson. 6 A. Good morning. 7 CHAIR OF THE INQUIRY: You're still under oath. 8 A. Yes. 9 CHAIR OF THE INQUIRY: Mr Lake. 10 Examination by MR LAKE 11 MR LAKE: Thank you, my Lord. Mr Anderson, I was just 12 turning to questions of the procurement strategy for the 13 tram contract. Were you aware what the procurement 14 strategy was? 15 A. I wouldn't say I was aware in depth in terms of what the 16 procurement strategy was at the stage that I was on the 17 Council or Council Leader. I couldn't state that I had 18 a comprehensive knowledge of where I was at and what was 19 happening. 20 Q. Even without a comprehensive knowledge, were you aware 21 of any of the key tenets of the strategy? 22 A. Not in any particular depth, I don't think. I mean, as 23 I say, at the stage that I was involved, there were two 24 major projects, ERL and the trams being progressed, and 25 I don't think I got into detailed discussions with 1 1 officers in terms of the procurement strategy. 2 Q. Could I ask you then to look at page 69 of your 3 statement. That could be found on page 33. 4 The first sentence notes that you gave evidence to 5 the Parliamentary Committee in relation to the Bills 6 going through Parliament. You say: 7 "I stated that I anticipated utility diversion work 8 would start in the autumn of 2006 and that work on the 9 new infrastructure would begin in the following year. 10 I'm not sure if I had a fixed view whether 100 per cent 11 of the utility work would be complete before the tram 12 project was fully implemented, but it was a big issue 13 for us." 14 Are you aware what happened in relation to that 15 issue, when the utility works would be carried out 16 relative to the other works? 17 A. I haven't been involved intimately in the discussions 18 about the progress of the utility works, but I'm aware 19 that there were a number of very, very serious issues in 20 terms of delivery of the utility works, and that utility 21 works were carried out in a number of places on a number 22 of occasions. 23 So it was a serious issue for the progress of the 24 tram project. 25 Q. In that light also, could I ask you to look at 2 1 paragraph 82 of your statement, which will be found on 2 page 38 of the scan, page 39 of the printed version. 3 You have noted there that you are not sure whether early 4 works on utilities had the desired effect of firming up 5 cost estimates as envisaged: 6 "Looking back on it with my involvement latterly in 7 the project, it was clear that the works on the 8 utilities were not appropriately handled. They were not 9 carried out efficiently and effectively in order to 10 enable the on-street works to proceed and that was 11 a huge issue in a number of different locations across 12 the tram route. Whether and how much I was aware of 13 that at the time I cannot say." 14 Is that suggesting that your understanding of the 15 utility works has all arisen since you left the Council? 16 A. I think in terms of utility works, we did have a lot of 17 discussions about making sure that we learned the 18 lessons of what happened in Dublin, because in Dublin, 19 they had a horrendous period when utility works were 20 being carried out in either an ad hoc or an inefficient 21 manner, and we specifically charged officials with going 22 to Dublin to learn the lessons of that, because we knew 23 that when it came to Edinburgh, Edinburgh being 24 a historic city, once you started digging up the roads, 25 you wouldn't necessarily find what was on the record of 3 1 being there. 2 So it was going to be a complicated issue, and my 3 recollection, as we made sure that Andrew Holmes and 4 senior officers at the Council understood that they 5 needed to be well prepared, and that the homework needed 6 to be done to make sure that that went as smoothly as 7 possible. Because what would happen if you didn't get 8 that right was that areas like Haymarket, areas like 9 Leith Walk, where there are significant numbers of small 10 traders, would face huge difficulties and also you would 11 also -- you would have reaction from residents in 12 Edinburgh who would see either dysfunctional or 13 inadequate work going on, and they wouldn't keep quiet 14 about it. That would be a massive issue in terms of 15 managing the tram project and the communications for it. 16 So we were aware of the scale of the challenge 17 there, and we did specifically charge officers with 18 making sure that they had arrangements in place to do 19 so, and I was given reassurances that that was the case. 20 Q. When you say we in that context, is that you -- 21 A. That would be me and Tom Aitchison and the discussions 22 that we had with Andrew Holmes. 23 Q. When you say you charged officials, you are talking 24 about people within the Council, are you? 25 A. Yes, City Development. 4 1 Q. Presumably you'd expect them to have to carry that 2 forward to TIE, because if it was within TIE -- 3 A. Absolutely. 4 Q. -- it would be handled? 5 A. Absolutely. I would expect them to work hand in glove 6 with TIE throughout that period to make sure that it 7 went as smoothly as possible. 8 Q. Other than expecting the utility works to be carried out 9 in an efficient and effective way, did you have any view 10 as to what that would entail, what was an effective way 11 of handling them? 12 A. I don't think logistically -- I'm not an engineer. It 13 wasn't my job to direct the officials on precisely how 14 to carry out the works in that sense. What it was my 15 responsibility, I think, to do, to flag up that we knew 16 this was a huge issue for Dublin, where it made the tram 17 project in Dublin very, very unpopular at the early 18 stages. It became much more popular once it was 19 actually implemented, but during the construction phase, 20 there was an absolute uproar in Dublin because of the 21 failures in the utility works, and we were alive to the 22 fact that that had to be done very, very carefully and 23 very efficiently in Edinburgh to make sure that we 24 didn't repeat those mistakes. 25 Q. In that paragraph 82 that we have on screen, you comment 5 1 that it was not in your view carried out efficiently and 2 effectively to enable the on-street tram infrastructure 3 works to proceed. 4 What did you consider the problem to be? 5 A. I think there were probably failures on the part of 6 contractors who were carrying out the work. I think 7 there were also failures in the way that the 8 communications were handled, in terms of advertising the 9 works that were going on; the way that the on-street 10 activities were managed, I think made it difficult. 11 They had signage issues, a whole range of difficulties, 12 and they went in and didn't complete utility work in 13 stretches of the tram route where they had to go back in 14 and repeat the works again. So there were failures in 15 terms of delivery in that sense, and that just added to 16 the pain and misery across the city. 17 Q. In relation to areas where works -- they had to go back 18 in and do works, it may be after you had left the 19 Council, were you aware of what the reasons were for 20 having to go back in? 21 A. I don't think in depth. I don't think I could point the 22 finger at either an individual contractor or 23 organisation and say they caused this particular 24 problem. But I think everybody in the city was aware 25 that it wasn't going the way it should have gone. 6 1 Q. Could we look, please, at the previous page, page 37 of 2 the scan, page 38 of the printed version. 3 It's the passage right at the foot of this page, two 4 lines. It goes on to the next page. You said: 5 "I'm not sure how much I was aware of these 6 issues..." 7 I should say the bit above is relating to various 8 design concerns: 9 "... at this stage, but I was certainly aware that 10 where there was an absolutely pressing and imperative 11 need to make sure that the design issues were progressed 12 quickly. If the design issues were not progressed, 13 there would be a problem when the contractor was 14 appointed to carry out the on-street works. The 15 contractor would be ready and on site to carry out the 16 works but would not be able to do so because of the 17 incomplete design work. It was therefore 18 a fundamentally important issue and something that had 19 been an absolute priority for Council officers in TIE 20 who were working on it at the time. 21 When you say "Council officers in TIE" there, do you 22 mean "Council officers and TIE"? 23 A. "and TIE". 24 Q. Probably a typographical error. 25 A. As I said, I didn't have much time to go through the 7 1 document to proof it. 2 Q. Is this something that with hindsight you are saying 3 that design is important, or was it something that was 4 very much a focus at the time for you? 5 A. I think -- that's a good question, very difficult to 6 give you a precise answer. I think I was aware of the 7 need to progress the design. Whether I was more aware 8 of that as an issue when compared to, for example, 9 utility issues, probably not as fixed on making sure 10 that officers were alive to the challenges that that 11 would pose, but I was aware of it. Whether that view 12 has been affected by hindsight, I mean, certainly it has 13 proven to be the case that the design works weren't 14 progressed quickly on the project. It's been proven to 15 be the case that the on-street works weren't progressed 16 efficiently and appropriately. 17 But I was aware of it, perhaps not to the degree 18 that I was aware of the need to make sure that the 19 utility works were carried out properly. In a sense, I 20 mean, that wasn't an issue that I was concerned about 21 because it wasn't -- as concerned about, because it 22 wasn't going to be a point of friction with residents 23 and businesses in the city centre, and was something 24 that I thought could have been readily resolved by 25 resources, by making sure that people progressed that 8 1 work quickly in the run-up to the construction of the 2 trams. Whereas I was acutely aware, even from my own 3 experience in my own ward, that utility works could be 4 very, very complicated, not just in Edinburgh, but in 5 particular in the city centre. So I was more alive to 6 that, I think, than I was to the design issues. 7 Q. I won't go further with design there just at the moment 8 then. 9 You are aware that the Draft Final Business Case for 10 the trams was put before the Council in December 2006? 11 A. Yes. 12 Q. Thereafter, the Final Business Case was put before the 13 Council in its final form in December 2007? 14 A. Yes. 15 Q. I appreciate you would have left the Council by the time 16 the final Final Business Case was being put forward. 17 Were you aware of any reason why that had to be done in 18 December 2007, or could it have been later? 19 A. Not specifically from memory, no. 20 Q. What I would like to do is look at the Draft Final 21 Business Case that you had a hand in. Could we look, 22 please, at document CEC01821403. 23 Perhaps just to get a feel for it, could we go to 24 the first page, also the second page, to get some idea 25 of the contents. 9 1 Do you recognise this document? 2 A. I accept that's what it is. I'm not sure I recognise it 3 from way back in 2006. 4 Q. Could we jump forward, please, to page 72. 5 Could we go forward one more page to page 73. Once 6 again it's the difference between the printed numbers 7 and the scanned page numbers. 8 We can see at paragraph 6.3 there a heading above 9 it, if we could just enlarge that. Even at that stage 10 it said: 11 "The structure highlights the following four key 12 bodies, the roles of which are represented in the 13 figures below." 14 The four bodies are the TEL Board, the Tram Project 15 Board and two sub-committees of the Tram Project Board. 16 Why was TIE not one of the key bodies by December 2006? 17 A. I think it was a key body. It's just that it fitted in 18 alongside the other organisations that were seen as 19 having a role in delivery of the project. It was not 20 that it wasn't a key body. 21 Q. But it wasn't -- these four seem to be the prime bodies, 22 the ones that are named there, with TIE in some sort of 23 secondary role? 24 A. I mean, from memory, I can't remember exactly the 25 rationale behind the wording in the Business Case in 10 1 that regard. But TIE was responsible for delivering 2 potentially a number of projects. So it would have fed 3 into those. This was specifically about the tram 4 project. So presumably the idea was that the input 5 would be received by TIE, but overseen slightly 6 differently. 7 Q. As at 2006, of course, the ERL project was still a live 8 one? 9 A. Yes. 10 Q. If you look over the page -- 11 A. And at that stage there were other transport projects 12 that TIE either was involved in or had aspirations to be 13 involved in, in east central Scotland. 14 Q. If you look over the page, it's page 74 of the scanned 15 version, we highlight the heading "Tram Project Board", 16 and the paragraph beneath it, it notes there, the Tram 17 Project Board is established as an independent body with 18 full delegated authority from the City Council through 19 TEL and Transport Scotland to execute the project. 20 This seems to be giving some primacy towards the 21 Tram Project Board as being the body that would actually 22 execute the project. Was that the intention at the 23 time? 24 A. I have to confess, I don't remember precisely what the 25 rationale and the logic was behind that, but looking at 11 1 that, and the relationship with Transport Scotland was 2 going to be an important one for the tram project. So 3 this was, I think, seen as the mechanism whereby the key 4 people got around the table to oversee the project. 5 Q. But I think there we see that the role is designated as 6 not one of oversight, but it is one that the Project 7 Board will execute the project. 8 Put it another way. How do you see the role between 9 TIE on the one hand and the Tram Project Board on the 10 other at this stage? 11 A. I think at that stage what you would want to do is you 12 would want to have a structure that enabled the project 13 to proceed and be properly monitored. 14 My view is it would be quite a fluid situation while 15 you were taking the project forward and you would 16 adjust, depending on the way the working relationships 17 between the various organisations. So I don't think 18 it's necessarily the case that there was a blueprint 19 that would be there forever and was essential for the 20 delivery of the project. 21 I think it was about making sure that there were 22 appropriate mechanisms in place to oversee and progress 23 the project. 24 Q. When you talked there about adjusting according to the 25 working relationships during the project, could you 12 1 explain what you mean by that? 2 A. In any major project over a period of time, you will 3 learn lessons as the project proceeds. You will have 4 people who have varying degrees of strengths, either in 5 their oversight role on the board or in the Council, 6 within the organisation itself. You will recruit or you 7 may lose people during the course of a project. 8 So there is a responsibility on the organiser, in 9 this case the Council, to be able to respond to those 10 issues over a period of time because these are big 11 projects. There will be challenges that arise from time 12 to time that need to be addressed. 13 The structures might not always necessarily reflect 14 the best way to respond to those structures. So you 15 have to be flexible in how you manage those, and that's 16 what I would have anticipated happening over the 17 lifetime of the tram project. 18 There would be issues that arose, needed to be 19 addressed, and the right people would get in a room and 20 sort them out. 21 Q. One can see therefore that matters might change over 22 time to suit the circumstances; is that right? 23 A. Yes. 24 Q. I have to ask you to say it rather than just nod because 25 it has to be picked up for transcript purposes. 13 1 A. Of course. 2 Q. But just taking a snapshot at December -- November 2006, 3 we can see at the top of the page, as it went forward to 4 the Council, what they were being told was that the Tram 5 Project Board would execute the project. I'm just 6 wondering, was there any reason why it was the Tram 7 Project Board rather than TIE at this stage? 8 A. I think as I said, because the aspiration was that TIE 9 would be involved in a number of projects and would feed 10 into those individual projects as a delivery vehicle for 11 them, and the Tram Project Board would have that role of 12 overseeing and helping implement the project with TIE's 13 input. 14 Q. If we jump forward then to, I think it will be page 77 15 of the scanned version, page 76 of the printed, you can 16 see now we are looking at a section on procurement 17 strategy, and if we look over the page from that -- 18 sorry, over two pages, page 78 of the printed version, 19 if we look, at the top half of the page, paragraph 7.13, 20 if we look at the fourth last bullet point there, we can 21 see development of what you've already talked about. It 22 notes that a key element was that there would be 23 separate procurement of utilities works to enable 24 completion of the utilities diversion, before 25 commencement of the infrastructure works, thus reducing 14 1 risk to the construction phase. And it goes on. 2 A. Yes. 3 Q. Was that a sort of continuation of the concerns that you 4 had expressed arising out of the Dublin experience that 5 they were to be dealt with? 6 A. That looks to me like a reflection of that concern, that 7 there was an understanding in the Council that had been 8 thrashed out over a period of time, that you had to get 9 the utility works done before you started laying tracks. 10 Q. Looking at the third bullet point in that list, it's 11 early commencement of design by SDS to reduce scope and 12 pricing risk in infrastructure and tram vehicle bids 13 together with a reduction in overall programme. 14 You said you weren't as involved in the issues of 15 design. Was the question of commencement of design 16 something that you were involved in? 17 A. I can't comment on how closely I was involved in the 18 issue of design, but there was a clear understanding 19 that in order to deliver certainty for the project, the 20 more that you could make sure that some elements of the 21 project were firmed up in advance, the better you would 22 be placed in terms of the procurement process. 23 Q. If we could jump forward to page 85 in the scanned 24 version, this time I meant page 85 in the scanned. It's 25 page 84 in the document. And we go to paragraph 7.53. 15 1 You see it's under the heading "Activities under the SDS 2 contract", but we are told that: 3 "It is expected that the overall design work to 4 detailed design will be 100 per cent complete when the 5 Infraco contract is signed." 6 Was that expectation, that part of the procurement 7 strategy something you were involved with in discussing? 8 A. I don't know that I was involved in ensuring that phrase 9 was included in there, but we had a very clear 10 understanding that the on-street utility works had to be 11 completed before you started laying the tracks, and 12 design work had to be progressed appropriately to make 13 sure you minimised the risk to the project. 14 MR LAKE: Thank you very much, Mr Anderson. Those are my 15 only questions. 16 CHAIR OF THE INQUIRY: Mr Fairley has made representations 17 following yesterday's evidence and no other party has, 18 so I presume nobody has any issues arising apart from 19 Mr Fairley. Mr Fairley? 20 MR FAIRLEY: My Lord, with your Lordship's permission, 21 I would wish to ask a small number of questions of this 22 witness arising out of his evidence yesterday between 23 pages 216 and 219 of the Live Note. In particular, 24 I would wish to ask him questions about the evidence he 25 gave at 216/22-25 and 217/17-20. Broadly speaking, 16 1 these relate to the question of the accuracy of 2 reporting of adjudication outcomes in the DRP process by 3 TIE, and the purpose of my questions will be to try to 4 assist the Inquiry in assessing the reliability of that 5 evidence insofar as it bears upon that issue. 6 What I would propose to do is to refer the witness 7 to certain passages in some documents which are already 8 before the Inquiry. Given the generality of the 9 evidence that he gave yesterday, I doubt that I will be 10 able to do that simply by reference to one document, but 11 I can say that I can limit the number of documents that 12 I will be referring him to no more than six and I will 13 only be referring to short passages within those 14 documents. 15 I should perhaps also say that this is an issue 16 which I had given notice last week was of interest to me 17 and that I might wish to ask questions about. That was 18 rather reinforced by the terms in which the witness gave 19 his evidence yesterday, which in my submission possibly 20 went rather further than in his written witness 21 statement. So it's for that reason that I'm making the 22 submission that I do. 23 CHAIR OF THE INQUIRY: Yes. I'm happy to allow your 24 application. 25 You said that you were prepared to restrict 17 1 reference to the number of documents. If you feel that 2 you wish to refer to more documents, that's not 3 an invitation, but if you feel that you wish to refer to 4 more documents to do justice to the points that you are 5 making, feel free. I take it all these documents are in 6 Haymarket. 7 MR FAIRLEY: They are all in Haymarket, yes. 8 CHAIR OF THE INQUIRY: When you are referring to them, if 9 you could give the reference -- 10 MR FAIRLEY: I will, yes. 11 CHAIR OF THE INQUIRY: -- solely so that the operator can 12 pick up the reference. 13 MR FAIRLEY: Yes. I'm obliged, my Lord. 14 Examination by MR FAIRLEY. 15 MR FAIRLEY: Mr Anderson, in your evidence yesterday you 16 spoke at one stage of what you described as a deliberate 17 co-ordinated series of actions to prevent key figures in 18 the Council from having accurate and important 19 information. Do you recall saying that? 20 A. Absolutely. 21 Q. And you slightly rephrased that a little later in your 22 evidence by describing it as an organised attempt to 23 prevent elected members in Edinburgh from having 24 important information, but effectively you were talking 25 about the same thing? 18 1 A. Yes. 2 Q. When you were asked by Counsel to the Inquiry to 3 identify what you meant by that, you identified two 4 particular matters, the second of which you described in 5 the following terms: 6 "If you lose adjudications and you present them as 7 being successes, that's deliberate misinformation that 8 you are presenting to the Council." 9 A. Yes. 10 Q. Is that correct? 11 A. Yes. 12 Q. That was one of the two? 13 A. Yes. 14 Q. It's that issue that I want to ask you about. I want to 15 ask you to look at some documents. 16 Could I ask, first of all, that we have document 17 number CEC00416111. Just the first page of that 18 document will suffice to start with. 19 Now, we see, I think, that this is a set of papers 20 for a Tram Project Board meeting to be held on 21 16 December 2009. Do you see that? 22 A. Yes. 23 Q. I appreciate you had left the Council by this stage. 24 You've been away from the Council by this stage for 25 roughly two years? 19 1 A. Under, but ... sorry, over. Over two years. 2 Q. On the front page there we see the distribution list for 3 these papers, divided between members and attendees and 4 then a list of people who received the papers for 5 information only. Do you see that? 6 A. Yes. 7 Q. If I have read this correctly, there are four 8 councillors in total within those two sets of lists. 9 That's Councillors Perry, Wheeler, Chapman and Buchanan; 10 is that right? 11 A. Yes. 12 Q. And there are also some fairly senior Council officials, 13 including Mr McGougan, who I think was the Finance 14 Director; is that right? 15 A. Yes. 16 Q. And Mr Anderson, who was the Chief Executive? 17 A. Director of City Development. 18 Q. Director of City Development, I'm sorry. I apologise. 19 I think I may also have missed a councillor in fact. 20 There's two other councillors amongst the members. 21 That's Councillors Jackson and Mackenzie; is that right? 22 A. Yes so. 23 Q. So there's in fact six councillors who received these 24 papers, it would appear? 25 A. Yes. 20 1 Q. Now, can we turn now, within that document, to page 6 2 and can you highlight 3.2 at the very foot of page, 3 "Strategic Summary". I'm afraid this goes over the 4 page, so we will have to take it in sections. 5 This is a heading -- a subject heading for what is 6 in fact, if you take it from me, this is the minutes of 7 the previous meeting of the Tram Project Board which 8 took place on 18 November. 9 What is recorded here is that RJ, who I think is 10 Richard Jeffrey? 11 A. It would be. 12 Q. Provided the board with a report on the outcome of the 13 decisions from the -- if we go over the page: 14 "... adjudicator (16 November 2009) on the 15 Carrick Knowe and Gogarburn Bridge matters." 16 These are both adjudications; is that right? 17 A. Yes. 18 Q. These were amongst the early adjudications that took 19 place between TIE and -- I'll refer to it as the 20 consortium, but it's also known as Infraco and sometimes 21 BBS. Is that right? 22 A. Okay, yes. 23 Q. What is then narrated three or four lines down is 24 somebody called KH, who I think is Kenneth Hogg; do you 25 see is that? 21 1 A. I see it. I don't recognise the name particularly. 2 Q. "Kenneth Hogg asked if TIE's interpretation of the 3 contract has changed through the evolution of this 4 process and queried whether a review of the strategic 5 direction of the DRP is necessary." 6 There then appears to have been a lengthy discussion 7 at board level about that, including about the 8 interpretation of the contract. 9 A. Yes. 10 Q. Do you see that? 11 It would seem to be reasonable to infer that the 12 news that Mr Jeffrey was bringing to the Tram Project 13 Board at this meeting on 18 November was not good news 14 about the outcome of these adjudications. 15 A. I think it's difficult to tell from that minute, and the 16 point that I would simply make is that key elected 17 members and officers of the Council, as far as I'm 18 aware, weren't given access to the adjudication 19 decisions in any detail. 20 What we were given was presentations or 21 interpretations of the adjudication process, whereas if 22 elected members had been given a copy of the 23 adjudications themselves, they could have made up their 24 mind. I have read these adjudications. I am not in any 25 doubt of what the outcome is. But I think there was an 22 1 attempt to maintain on the part of TIE an interpretation 2 of the adjudications that was much more positive than 3 was actually justified by the adjudication results 4 themselves. 5 So in that sense, I do firmly believe that elected 6 members and senior officers of the Council were misled. 7 Q. I'll come to elected members shortly, Mr Anderson, but 8 really what I'm asking you about at the moment is 9 confined to the Tram Project Board. 10 It would certainly appear from the relatively brief 11 minute that we have of the meeting of 18 November 2009 12 that Mr Jeffrey was telling the board at that stage that 13 the adjudications at Carrick Knowe and Gogarburn Bridge 14 had not been successful? 15 A. I don't know if I can be precise, looking at the wording 16 of that minute, that that's exactly what that says. 17 There were questions raised about Richard Jeffrey's 18 presentation of the material and it was queried whether 19 a review of the strategic direction of the DRP is 20 necessary. It doesn't spell out in precise terms why 21 that question was raised. 22 Q. If I'm right about the interpretation of that, however, 23 that would not suggest that Mr Jeffrey was presenting 24 losses as successes, would it? 25 A. I don't know if I can say that definitively, looking at 23 1 that minute. What I can tell you is that senior elected 2 members and officers of the Council were entitled to get 3 access to the information they needed to make important 4 decisions about one of the biggest projects and the most 5 controversial projects in the city's history and they 6 weren't given access to that information. Indeed they 7 were denied, and deliberately denied access to that 8 information by officials and TIE. 9 Q. What I'm asking you about, Mr Anderson, I'm sorry if I'm 10 not making myself clear, is -- 11 A. I think you are making yourself clear. I'm just not 12 sure I agree with you. 13 Q. If I'm not making myself clear, the fault is mine. 14 I'm asking you about an allegation that you made 15 yesterday that adjudications were presented as being 16 successes when in fact they were losses. And what I'm 17 putting to you is if my interpretation of this passage 18 in the minute is correct, it would not appear that 19 Mr Jeffrey was presenting losses to the Tram Project 20 Board as successes. Do you agree or disagree? 21 A. I don't agree that you can definitively say that, 22 looking at that minute. I wasn't at the meeting. I'm 23 not sure what Richard Jeffrey said to the Project Board 24 at the time. 25 What I do know, and what I think will emerge in 24 1 discussions between officials from Bilfinger is that the 2 interpretation that was presented on the adjudication 3 process was not a reflection of the reality of the 4 adjudication process, in terms of the way that 5 information was conveyed by TIE. 6 What is an absolute fact, though, is that key 7 figures in the Council who should have been given access 8 to the full information were given interpretations of 9 the information rather than the actual adjudication 10 process themselves. 11 If TIE wanted to convey information accurately about 12 the outcome of the adjudication process, they should 13 have just given the adjudications to the officials and 14 the elected members who were taking these very difficult 15 decisions. 16 Q. Is your evidence then, Mr Anderson, that you simply 17 don't know what Mr Jeffrey said to the Tram Project 18 Board about Carrick Knowe and Gogarburn? 19 A. Of course I don't know. I wasn't there. I think that's 20 self-evident. I don't know what Richard Jeffrey said to 21 the Tram Project Board. What I do know is that elected 22 members and officials of the Council, even to the extent 23 of the Chief Executive of the Council, did not get 24 access to the detailed information that was in the 25 adjudication decisions. 25 1 I can't for the life of me understand why. Had 2 I been Council Leader at that time, I would have 3 expected that information to be on my desk. I can 4 understand the concerns about confidentiality and about 5 not wanting to give advantage to a contractor in that 6 kind of process. But the Chief Executive of the 7 Council, the Leader of the Council, the Director of the 8 City Development, the executive member for that 9 portfolio, should be trusted with any and all 10 information that they need to take such a decision. 11 There's no question in my mind that none of those four 12 individuals would leak information in a damaging way 13 about the adjudication process. 14 But for whatever reason, they were not given that 15 information. I think that leads me to believe very, 16 very firmly there was a deliberate campaign on the part 17 of TIE to deny those officials and those elected members 18 who were taking big decisions on this issue, the 19 information they required in order to take those 20 decisions. 21 Q. With the exception of the Leader of the Council -- 22 CHAIR OF THE INQUIRY: Mr Anderson, I think if we can -- 23 I think we have got quite clear in mind what your 24 evidence is. 25 I wonder if you could just apply your mind to the 26 1 particular question that you're being asked and give as 2 concise an answer as possible? 3 A. I'll do my best. 4 MR FAIRLEY: With the exception of the Leader of the 5 Council, who I will come back to in a moment, all of the 6 individuals you have mentioned as people who should have 7 had information about the adjudications were on the Tram 8 Project Board. That's right, isn't it? 9 A. A number of them, yes. 10 Q. All of them, apart from the Leader of the Council? 11 A. Yes. I accept that. 12 Q. Well, can I maybe help you then a little more with what 13 was said at the Tram Project Board in December of 2009. 14 In that same document, please, can you go to 15 page 23. 16 A. Sorry, can I just go back. I don't think the 17 Chief Executive of the Council was at the Tram Project 18 Board. So it was -- neither the Chief Executive nor the 19 Leader were at that meeting. 20 Q. Page 23 of the same document is a paper presented to the 21 Tram Project Board by someone called Mark Hamill, who 22 I think had an involvement in risk. Is that your 23 understanding? 24 A. I don't recognise the name Mark Hamill, but I accept 25 what you're saying. 27 1 Q. This, I should stress, is part of the board papers that 2 were presented to the Tram Project Board for the 3 December meeting. If we highlight from "period 9 4 update" to the foot of the page, please, and bring that 5 up on the screen. 6 What Mr Hamill records there for the board members 7 of the TPB is that the table below highlights those 8 issues which have entered DRP, which stands for dispute 9 resolution procedure, and that's another name for the 10 adjudications? 11 A. Yes. 12 Q. "... their current status and anticipated timescale for 13 conclusion. Previous DRP outcomes have been reported in 14 earlier papers." 15 I think in fairness that there had only been one 16 previous DRP outcome in the form of an adjudicator 17 decision prior to this board meeting. Are you aware of 18 that? 19 A. I'm assuming that that's the case. I wouldn't challenge 20 what you're asserting. 21 Q. It was a decision in relation to the Hilton Hotel car 22 park issued by Robert Howie QC, and TIE were successful? 23 A. They were, yes. 24 Q. Mr Hamill goes on: 25 "This table has been updated to reflect the 28 1 following." 2 It is the first bullet point I would draw your 3 attention to: 4 "The adjudicator reached a decision, preferring 5 Infraco's case on 5a and 5b and this is currently under 6 review by TIE and TIE's legal advisers." 7 Do you see that? 8 A. Yes. 9 Q. In the table below we see that 5a and 5b is a reference 10 to Gogarburn and Carrick Knowe. Do you see that? 11 A. Yes. 12 Q. So by the time of December 2009, there have been three 13 adjudication decisions. TIE has won the decision at 14 Hilton and Mr Hamill is reporting to the Project Board 15 that Infraco, the adjudicator has preferred Infraco's 16 case in relation to Gogarburn and Carrick Knowe. Do you 17 see that? 18 A. Yes. 19 Q. It couldn't really be any clearer who had won, could it? 20 A. I haven't seen these documents before, and that hasn't 21 been reflected in any of the conversations I have had 22 with elected members or with senior officials of the 23 Council. 24 Q. That's not the question I asked you, Mr Anderson. If 25 you would just confine yourself to answering my question 29 1 as his Lordship directed you. It could not be any 2 clearer that Infraco had won the adjudications at 3 Gogarburn and Carrick Knowe? 4 A. It looks clear from that, yes. 5 Q. If that is correct, that would not suggest that, at 6 least as far as information being imparted to the Tram 7 Project Board is concerned, these adjudications were 8 being presented as successes when in fact they were 9 losses, were they? 10 A. In terms of the presentation in that context, yes. 11 Q. So, so far as Gogarburn and Carrick Knowe is concerned, 12 we can take it that your evidence yesterday that 13 adjudications were being presented as successes when in 14 fact they were losses, you weren't referring to 15 Gogarburn and Carrick Knowe, you can't have been, 16 because that's not what was happening? 17 A. My recollection of the presentation of the adjudication 18 process was that the overall presentation of those was 19 much more positive to elected members and to senior 20 officials than was justified by what was in the 21 adjudications. 22 Q. I'll come to elected members in a moment, Mr Anderson. 23 I know I have said that on a number of occasions. I'm 24 just asking you now about the Tram Project Board. 25 It would not appear that Gogarburn and Carrick Knowe 30 1 were being presented to the Tram Project Board as 2 victories when in fact they were losses; that's correct? 3 A. I don't disagree with that. 4 CHAIR OF THE INQUIRY: Mr Fairley, we have already got that 5 question. Move on. 6 MR FAIRLEY: Thank you. 7 The next document I would like you to look at, 8 please, is CEC00473005. 9 This is a similar set of papers for a board meeting 10 of the Tram Project Board on 13 January 2010, so the 11 following month. Do you see that? 12 A. Yes. 13 Q. The front page contains similar lists of those who 14 received the papers on the distribution list. Do you 15 see that? 16 A. Yes. 17 Q. Now, can we go just for the sake of brevity straight to 18 page 47 of this document. Can you highlight the section 19 marked "Dispute resolution" all the way down to the foot 20 of the page. 21 If you take it from me, Mr Anderson, that this is 22 a report that was attached to the Tram Project Board 23 papers which was in fact a report to Transport Scotland 24 by the Tram Project Board. 25 A. Okay. 31 1 Q. What is recorded here is that there have been five 2 disputes referred to DRP, that's to adjudication, by TIE 3 and it lists them. It says: 4 "Agreement has been reached on Hilton (adjudicator 5 awarded in TIE's favour)." 6 We discussed that a moment ago. Do you see that? 7 A. Yes. 8 Q. So that is being reported correctly as an award in TIE's 9 favour. 10 "Commercial settlement has been reached on Haymarket 11 and EOT1." 12 So another two have been settled. Then it records 13 that: 14 "In the period we received the adjudicator's 15 response for the DRPs raised by TIE against Gogarburn 16 and Carrick Knowe Bridge. The adjudicator found largely 17 in favour of the position taken by BSC. TIE's response 18 to the adjudicator's decision remains under review." 19 Do you see that? 20 A. Yes. 21 Q. It would appear therefore that not only were the Tram 22 Project Board being told that Gogarburn and 23 Carrick Knowe had been resolved in favour of BSC, which 24 is another name for Infraco, but also that information 25 was being included in a report to Transport Scotland? 32 1 A. In that information, in the way that's conveyed to those 2 people, yes. 3 Q. Then in the paragraph beneath that: 4 "BSC have so far referred two disputes to dispute 5 resolution procedure." 6 So these were adjudications initiated by Infraco; is 7 that right? 8 A. Yes. 9 Q. One of them is described as Russell Road retaining wall. 10 Do you see that? 11 A. Yes. 12 Q. Another one, delays associated with the MUDFA revision 13 8. 14 What's recorded there at the third line is that the 15 adjudicator's decision against Russell Road was received 16 on 4 January and will be reported in period 11. 17 A significant saving resulted in excess of 400,000 on 18 the estimate presented by the consortium, by Infraco, 19 and the adjudicator agreed with TIE on many of the 20 principles in dispute. 21 That is, can I suggest to you, an entirely accurate 22 summary of the adjudicator's decision, of the 23 Russell Road retaining wall decision? 24 A. I think it's an accurate assessment of the outcome. I'm 25 not necessarily convinced that it's an accurate 33 1 assessment of how that was presented to elected members 2 in the Council and senior officers. 3 Q. That wasn't the question I asked you, Mr Anderson. 4 A. Understood. 5 Q. I'm asking how it's presented to Transport Scotland and 6 how it's being presented to the Tram Project Board. 7 What I'm putting to you is it's an entirely accurate 8 summary of the Russell Road decision, isn't it? 9 A. It's accurate in the way it's presented. 10 Q. Now, on a number of occasions I have said that I will 11 look at the question of elected members, and I'm going 12 to do so in the reference to one further document at 13 this stage. Could we have the document TRS00010706. 14 We see from the way that this is set out that it 15 starts with an email dated 21 April 2010 from Bill Reeve 16 to various individuals. But there is an email chain. 17 Do you see that? 18 A. Yes. 19 Q. I want you to go down to the foot of the page. We don't 20 need to highlight it on the screen, but I think we can 21 all see that that's an email from Richard Jeffrey of 22 TIE, dated 19 April 2010. Do you see that? 23 A. Yes. 24 Q. It is addressed to five named individuals, all of whom 25 are elected members; yes? 34 1 A. Yes. 2 Q. They are not just elected members. They are actually 3 the leaders of the five political groups which are 4 represented in the Council in April of 2010? 5 A. Yes. 6 Q. So we have Ms Dawe for the SLD, Mr Whyte for 7 Conservative, Mr Cardownie for the SNP, Mr Burns for 8 Labour and Mr Burgess for the Green Party; is that 9 right? 10 A. Yes. 11 Q. We see from the start of this email that it is 12 essentially an email from Richard Jeffrey updating them 13 on his review of progress after a year in the job. Do 14 you see that? 15 A. Yes. 16 Q. Can we go over to the second page, please. There are 17 two bullet points towards the foot of that page. Could 18 you highlight the first of those, please. 19 This is the passage in that email where Mr Jeffrey 20 summarises for these elected members the disagreement, 21 as he puts it, between TIE and the consortium. Do you 22 see that? 23 A. I see it. 24 Q. What he says is: 25 "There is a disagreement over what is or is not 35 1 included in the original fixed price contract. We have 2 always accepted that the certain things are legitimate 3 extras." 4 I think "the" is probably surplus there: 5 "That is why we have already agreed over 16 million 6 of extra payments. We do not agree that Bilfinger 7 Berger are entitled to all the things they are claiming 8 for. Whatever the disagreement, there is a clear and 9 conventional process under the contract for reaching 10 a conclusion on this issue. Some of these issues have 11 been decided at adjudication, which BB are claiming TIE 12 have 'lost'." 13 Do you see that? 14 A. Yes. 15 Q. In terms of this timing, this email is written at the 16 stage when there have been four adjudication decisions. 17 Hilton, Gogarburn, Carrick Knowe and Russell Road. 18 That's right, isn't it? 19 A. I'm assuming that's the case. 20 Q. There had only been, by April 2010, four decided 21 adjudications. 22 What Mr Jeffrey reports to these elected members is: 23 "It is true that we did not get all the results at 24 adjudication we would have liked ..." 25 Now, pausing there, that does not look, would you 36 1 agree, as if he is presenting losses as successes? 2 A. I think I'm confused about what exactly he is saying 3 during that statement. I don't think it's a very clear 4 statement. It's the first time I have seen it. But 5 what he is saying that is we do not agree that Bilfinger 6 Berger are entitled to all the things that they are 7 claiming for, and he's just saying that some of these 8 issues have been decided at adjudication which BB are 9 claiming TIE have lost. 10 I don't think that fully explains the situation to 11 elected members. 12 Q. What he's saying is the adjudications didn't go as well 13 for us as we would have liked, but on the other hand, 14 the results of the adjudication do not support the view, 15 extreme view of BB's entitlements that they took. 16 What I'm suggesting to you is that's an entirely 17 accurate summary of the four adjudications that had 18 taken place by April 2010? 19 A. I don't think that's how I would explain the 20 adjudication process to the elected members if it had 21 been me reporting on that. I don't think he's making it 22 clear to elected members what happened during the 23 adjudications. That's a narrative, rather than an 24 explanation. And a subjective narrative. 25 Q. It is not consistent, is it, with your allegation that 37 1 you made yesterday in very general terms that TIE were 2 presenting losses at adjudications as successes? 3 A. I do not see that as necessarily being inconsistent with 4 that claim. 5 Q. It's not consistent with the proposition that you put 6 forward that TIE were being dishonest about the outcome 7 of the adjudications? 8 A. I don't think it's inconsistent. I mean, can I just 9 say, we've already heard -- I mean, I heard because 10 I was in the room earlier, about the fact that 11 information was presented about the progress of design 12 work on the project. Information was presented to 13 elected members on the progress on the utility 14 diversions as well that was inaccurate and did not give 15 the full information to elected members. And with 16 regard to this information, I don't think, from my 17 discussions with either elected members or senior 18 officials, they were given accurate and full information 19 about the outcome of the adjudication process. 20 So I see that as a pattern of behaviour of 21 misleading the Council and providing the wrong 22 information, inadequate information to the Council, 23 and I repeat this again. This is the biggest, most 24 complex and most controversial project that the Council 25 had ever handled up until that point in modern history. 38 1 It was relying on TIE and officials in TIE to present 2 information to them honestly and openly in a way that 3 they could take the best decisions they could, because 4 these were decisions for which they would be held to 5 account, and they are being held to account through this 6 Inquiry process. 7 That suggests to me there was a pattern of behaviour 8 on the part of TIE to deny elected members who were 9 representing the citizens of Edinburgh legitimate 10 information that they needed to take decisions on this 11 project. 12 CHAIR OF THE INQUIRY: Mr Anderson, can I just interrupt. 13 The purpose of Mr Fairley asking you questions is he's 14 trying to focus on particular questions and it would be 15 helpful if you gave particular answers. I think I've 16 got clear in my mind what your position is and what the 17 reasons are for that. But you're being asked 18 specifically about the reporting of the adjudications 19 within this context. 20 A. Thank you, Lord Hardie. That's a helpful comment. My 21 only suggestion there is I don't think that accurately 22 reflects the adjudication process in the way that that's 23 presented. 24 MR FAIRLEY: Can I take it, Mr Anderson, that whatever else 25 we may agree or disagree on, we may agree on this. 39 1 Until I showed you this email, you did not know that 2 Mr Jeffrey had told the four leaders of the party groups 3 that it was true that TIE had not got all of the results 4 at the adjudication that they would have liked? You did 5 not know that? 6 A. I did not know what Richard Jeffrey had advised the 7 Council Leaders at that stage. 8 Q. There are just two further documents I would ask you to 9 look at, please. The first one is CEC00223543. 10 This is another set of papers for another Tram 11 Project Board meeting on 30 June 2010. So we've moved 12 forward now to the summer of 2010. 13 Could you put up on the screen, please, page 27 of 14 that set of papers. Could you highlight, please, the 15 section at the foot of the page. Could you highlight 16 the foot of the page marked "Dispute resolution". 17 Now, by this stage, another adjudication decision 18 had been received on 24 May 2010 in relation to what's 19 described as section 7 drainage. I think it's also 20 described elsewhere as section 7(a) track drainage. 21 That's dealt with in the fourth bullet point. Do you 22 see that? 23 A. Yes. 24 Q. What is recorded there is that the adjudicator decision 25 on section 7 drainage was received on 24 May and 40 1 supports Infraco as to the existence of change in one 2 section. It goes on to talk about value being 3 ascertained with final resolution expected as being 4 650,000 to 750,000. Do you see that? 5 A. Yes. 6 Q. Insofar as that records that the adjudicator's decision 7 supported Infraco as to the existence of change, which 8 was what the adjudication was about, it entirely 9 accurately records the decision of the adjudication? 10 A. I wouldn't challenge the factual information that's 11 presented in it. I'm not sure it's presented in the 12 most helpful way. 13 Q. Had you seen this document before I referred you to it 14 just now? 15 A. No. 16 Q. Finally, can we look at document number TIE00896978. 17 This is another set of Tram Project Board papers. We 18 have moved on now to the end of 2010, to 15 December. 19 Do you see that? 20 A. Yes. 21 Q. Could you go to page 31 of that set of papers, please. 22 Could you highlight the dispute resolution section. 23 Can we get the whole of that, including the table. 24 I apologise. Just to the foot of the page. Thank you. 25 Now, by this stage, in November 2010, an 41 1 adjudication decision had been issued in relation to 2 Landfill Tax. Do you remember that? 3 A. Not in great detail, but yes. 4 Q. If I were to suggest to you that the essence of the 5 dispute between TIE and the consortium was whether or 6 not the consortium should have applied for an exemption 7 for Landfill Tax, does that jog your memory? 8 A. Not greatly, but I accept that, yes. 9 Q. What is recorded here is in the third paragraph: 10 "During the period, Landfill Tax was adjudicated and 11 a decision provided. The adjudicator decided that the 12 landfill would not have been exempt and therefore there 13 was no need to apply for the exemptions." 14 Putting it another way, Infraco won. 15 A. Yes. 16 Q. Again, had you seen this document before I put it to you 17 just now? 18 A. No. 19 MR FAIRLEY: Thank you, my Lord, I have no further 20 questions. 21 CHAIR OF THE INQUIRY: Thank you very much. Mr Anderson, 22 you're free to go. You are still under your citation, 23 but hopefully we won't need to recall you at any stage. 24 If that does happen, Ms Fraser will be in touch. 25 A. Lord Hardie, I just wanted to say a word or two. This 42 1 is an unusual process in which you are interviewed and 2 then given a statement, but I do understand the need to 3 hold all those accountable who were involved in the tram 4 process, myself included in that. I would say that 5 I know a lot of the key protagonists in this pretty 6 well, and that those are people who care passionately 7 about Edinburgh and wanted to do their best on the part 8 of the city. 9 I think they made mistakes and took decisions that 10 weren't in the best interests of progressing the 11 project. I think there's a difference between people 12 who made mistakes in good faith on the basis of the 13 information that they had, people like Jenny Dawe and -- 14 CHAIR OF THE INQUIRY: I think that's a matter ultimately 15 for me. I do appreciate the difference between people 16 making mistakes and people deliberately misleading other 17 people. I do appreciate that. I will take into account 18 all the evidence and I'll form a view what I think of 19 the situation. 20 A. I understand that. 21 CHAIR OF THE INQUIRY: Thank you. 22 A. Okay. Thanks. 23 (The witness withdrew) 24 MR LAKE: My Lord, the next witness that I would like to 25 call is Iain Whyte. 43 1 MR IAIN WHYTE (sworn) 2 Examination by MR LAKE 3 CHAIR OF THE INQUIRY: Could I ask you, Mr Whyte, as with 4 other witnesses, to listen to the question and to simply 5 answer it as concisely as possible. 6 MR LAKE: Mr Whyte, could you state your full name, please. 7 A. My name is Iain Whyte. 8 Q. The Inquiry has your address details already, but by way 9 of background, you have been a councillor in the City of 10 Edinburgh Council from 1995, I think, until the present 11 day? 12 A. Yes. 13 Q. You were the Leader of the Conservative Group in the 14 period from 2002 to 2010? 15 A. That's correct. 16 Q. Could I ask you to look at a document. You should have 17 it in paper copy in front of you, but I'll also have it 18 put on screen. It's reference TRI00000125. 19 Do we see both the electronic version and the paper 20 version; it is a copy of the witness statement that you 21 have provided to this Inquiry? 22 A. Yes. 23 Q. On the paper version you should see you will have signed 24 the last page? 25 A. I should have. I did sign one. Yes. 44 1 Q. Can we take it that this is your evidence given to the 2 Inquiry? 3 A. Yes. 4 Q. I would like to ask you a few additional questions in 5 relation to certain matters arising out of it. With 6 that statement, could we firstly look at page 4. This 7 is under the heading "Initial Proposals" and your answer 8 to question 8. It's just a matter of some 9 clarification. 10 The question is -- concerns responsibility for the 11 decision to create TIE in 2002. You note in your answer 12 that you believe the Council ultimately decided to 13 create TIE, but it came as a firm recommendation from 14 the Council Chief Executive, Michael Howell, and his 15 team at TIE and specifically the City Development team. 16 I can understand the recommendation from the 17 Chief Executive and the City Development team. I think 18 Michael Howell was the Chairman of TIE ultimately when 19 it was formed? 20 A. Yes. 21 Q. I was puzzled by how it was that Michael Howell and the 22 team at TIE were responsible for the creation of TIE? 23 A. I may have had some misrecollection at the time I gave 24 the statement. And I haven't corrected that. 25 What I can't remember was exactly when 45 1 Michael Howell and those people came on board. I think 2 there were some external people helping Andrew Holmes 3 and his team around that time and were giving advice. 4 So that may have been what I was referring to. But 5 I don't have documents from that period with which to 6 check any of it. 7 Q. Is it your understanding that when TIE were established, 8 it was not specifically for the tram project, but with 9 a view to implementing the transport initiative 10 throughout Edinburgh? 11 A. Yes, it was. Although ultimately, as various aspects of 12 those proposals dropped away, TIE remains solely based 13 around trams. 14 Q. Indeed. Could we look at the next page of your 15 statement, please. I just want to look at the reasons 16 for establishing TIE. 17 If you could highlight the upper half of the page, 18 the first three paragraphs there should be legible if 19 you highlight it. 20 Just dealing with the second paragraph there, you 21 note: 22 "There was a team in the Council who managed the 23 roads and other transport infrastructure, but they were 24 of a certain size and were already working full time. 25 There is a need to bring in additional people and it was 46 1 seen that the best way of doing this was to bring them 2 into this special purpose vehicle. They were not to be 3 permanent Council employees and you could go outwith 4 local government terms and conditions. For instance, if 5 you needed an engineer at a set salary that was outwith 6 the Council's salary bands, you could buy that expertise 7 in if you were doing it through an arm's length 8 company." 9 A. Yes. 10 Q. There are two different things there. One is the 11 different salary structure. I think that's plain 12 enough. It frees you from the constraints of the 13 Council's salary terms? 14 A. Yes, and often expert engineers for projects like this 15 may be paid considerably more than a Council engineer 16 working on roads would be paid. So it allowed you to 17 pay more to get the correct expertise. That was one of 18 the main reasons. But there were also reasons, I think 19 I said in the paragraph later, around the structure of 20 bringing people in. People with the right expertise to 21 do the work, but also people as directors of TIE, 22 independent to bring expert advice to councillors on 23 that board. 24 So there were two aspects around the expertise being 25 brought in. 47 1 Q. Was there any reason why that particular expertise, 2 leaving aside the salary structure, could not have been 3 engaged by the Council, for example, on a consultancy 4 basis? 5 A. My recollection was that the advice we were given, and 6 it seemed reasonable advice to me at the time, was that 7 consultancy, for a lengthy period, would be very 8 expensive. It was best to have people brought in 9 specifically for the project, or on TIE, and when TIE 10 was first set up, as you have indicated, there were 11 potentially more projects to do or there was an 12 expectation that the work would be ongoing for a longer 13 period. 14 So it didn't seem consultancy was the right way of 15 doing it at that time, but this would allow the Council 16 to buy in that expertise and almost ring-fence it away 17 from other Council officers and if something went wrong 18 and you had to wind it up, you could without having the 19 worry of people on the Council payroll as well. 20 Q. If we look at the final paragraph that we have on the 21 screen at the moment, you go on to a further reason, 22 where you say: 23 "It was also a bit about project oversight." 24 This is the creation of TIE: 25 "Part of having a strong TIE team meant that there 48 1 would be councillor and officer representation on an 2 independent board of directors. So both shareholder and 3 stakeholder representation, but also allowing them to 4 bring in independent non-executives to oversee any work 5 that the company was doing and question from an expert 6 point of view." 7 Now, I take it from the second sentence there, you 8 are talking about the bringing in of councillor and 9 officer representation would be what makes the TIE team 10 strong. 11 A. So the TIE officer team would bring appropriate expert 12 and professional expertise to undertake the project 13 work. 14 The aim of creating the TIE Board to oversee that 15 work was to bring together a host of different things. 16 So you would have councillor and Council officer 17 representation on that board to bring oversight from the 18 Council and from a public point of view, and to 19 undertake general governance and assurance work. That 20 would be bolstered by bringing in further independent 21 directors who had expertise from the transport industry 22 or from finance or from law as appropriate, and who 23 could question and bring non-executive governance to the 24 work that the TIE team was doing in a way that you might 25 not have -- you would have some of that from Council 49 1 officers who had some experience in these areas, but 2 maybe not of a project directly of that type, and you 3 wouldn't necessarily have it in councillors because 4 we're elected from the public, and so you could bring in 5 additional expert non-executive governance through that 6 structure. 7 Q. Do you consider that this idea of bringing in expert 8 non-executive directors was something that was 9 successfully carried out in relation to TIE? 10 A. With hindsight, no, because as the project developed, 11 I've come to the belief that the TIE Board and the 12 Council officers who were part of that and were 13 reporting back to the Council didn't bring strong enough 14 governance and oversight to the work that the team were 15 doing. 16 But it's difficult for me to pinpoint exactly how or 17 where that came into play, because obviously I wasn't on 18 the TIE Board and I was hearing about it arm's length 19 from colleagues who were. 20 Q. You said in your answer there that the Council officers 21 on the board did not bring strong enough governance. 22 A. Well, I fully expected, and indeed, when we set up TIE, 23 and then when TIE was given responsibility for trams and 24 there were discussions about how the project would be 25 managed and the contract work would be managed, 50 1 I personally had discussions with Tom Aitchison, the 2 Council Chief Executive, about how we as a Council would 3 be assured that TIE was doing the job on our behalf, was 4 looking after public money, and was aiming to complete 5 the project as efficiently as possible. 6 I was given assurance that the reporting line was 7 such that those who were on the board as Council 8 directors would still have a reporting line to the 9 Council, that there was put in place a tram monitoring 10 officer who would oversee all of the work that TIE was 11 doing and report back to the Council and that the 12 Chief Executive himself would be responsible for 13 ensuring shareholder value effectively. 14 Q. You said you were given an assurance on these matters. 15 Can you remember who gave you that assurance? 16 A. It would be in briefings with Tom Aitchison, 17 Chief Executive. But it was backed up in further 18 discussions with other officers. So people like 19 Andrew Holmes and Donald McGougan. 20 Q. In terms of this reporting line to the Council, was that 21 to be purely the Council officers who might be sitting 22 on the company board or the councillors also? 23 A. Well, there were also councillors. I expected them 24 to -- while having a duty to the company, to also bring 25 some public oversight in the role that they undertook. 51 1 Q. Just before I turn to the question of the councillors on 2 the board, you referred to the Tram Monitoring Officer? 3 A. Yes. 4 Q. That was, I think, a Council official; was that correct? 5 A. That was a Council official. 6 Q. Charged with some oversight of the project generally? 7 A. The project generally and of TIE, and of reporting back 8 to the Council's Transport Committee, and I think there 9 was also something called the Tram Working Group which 10 was to allow meetings to be held privately away from -- 11 in a fully constituted group, but away from transport 12 committee because there may be commercially confidential 13 matters that had to be discussed, although my 14 understanding is that that group very rarely met. 15 Q. We may come back to issues of confidentiality in 16 a little while. 17 I want to look at the position of the councillors 18 who were on the board. 19 You referred here on page 5 to the question of them 20 providing some oversight function. I think it's fair to 21 say you also regarded that they might provide some 22 control over the company activities; is that correct? 23 A. I would have expected them to. 24 Q. In fact, the reference to that, I couldn't find it 25 momentarily, is if you look at the next page. It's the 52 1 paragraph there beginning "CEC exercised"? 2 A. Yes. 3 Q. "CEC exercised control over TIE by putting people on the 4 board, but there was also a reporting relationship to 5 our senior officers, to the Chief Executive, and 6 somebody from City Development." 7 Can you explain how it is you consider that putting 8 councillors as directors on the board provides the 9 Council with control over the activities of the company? 10 A. Well, there were a number of ways that you could 11 exercise control over the company. Ultimately, that 12 control rested with officers reporting to us as Council, 13 to our Transport Committee or to the Council itself. 14 That was as shareholder and as sole shareholder, the 15 Council could direct the company. 16 Q. Just pause there. You're talking about officers 17 reporting to councillors. Is this -- 18 A. Yes. 19 Q. -- officers who would be on the board, or just Council 20 officers generally would make enquiries, get the 21 information and brief the councillors appropriately? 22 A. So there were two ways -- I suspect we have a slightly 23 different way of thinking about Council companies now 24 and the whole situation has evolved since back then and 25 we're probably talking about 2006/2007. 53 1 I was concerned, particularly in the period up to 2 2007, about how -- so I did expect that councillors on 3 the board would, while maintaining the interests of the 4 company, would retain the thoughts of the shareholder 5 that they wished to appropriately procure the tram 6 project and other projects, and in the public interest. 7 And that was why the company was set up and that was the 8 purpose of the company. 9 So I expected them to have oversight in that sense, 10 and push for those objectives. 11 In terms of reporting to the Council, I was 12 concerned that we, as the Conservative Group, as an 13 opposition, were frozen out of the process at that 14 point. We had opposed the road tolls, the congestion 15 charging, and because of that there were political 16 decisions made to prevent us having a member on 17 transport boards like this, or any other direct input, 18 until the administration changed in 2007. 19 So we didn't have anyone with direct knowledge. 20 So I was pushing the officers, through private 21 briefings and questions I had with them, to say, well, 22 if something is happening in one of these companies or 23 boards, how do we as the Council know about it? 24 That was where my understanding of the fact that 25 officers, and specifically the Chief Executive who 54 1 wasn't on the board, things would be reported to him and 2 he would report them back to Council, were there any 3 issues. 4 Q. Reported by whom? 5 A. Well, once the Tram Monitoring Officer was in place, it 6 was their job to oversee and then let the 7 Chief Executive know if there was anything that should 8 be reported. But ultimately, with the line of command, 9 the line of management, direction, ultimately it's the 10 Chief Executive's job to report to the Council. 11 Q. Chief Executive of the Council? 12 A. Of the Council. 13 Q. What you're describing there is the councillors would be 14 kept informed as a result of the activities of Council 15 officers working as Council officers? 16 A. Yes. 17 Q. In the sense you would have the Tram Monitoring Officer, 18 the Chief Executive, and possibly other Council 19 officers, and it's their job to enquire and inform 20 councillors? 21 A. Yes. 22 Q. Now, none of that that you just described involves 23 putting anyone on the boards of these companies? 24 A. No. So that was all supplemented by having people on 25 the board of these companies, and then there was also -- 55 1 so by having people on the board of these companies, 2 there was then a more informal relationship between the 3 work of the board and the work of councillors and the 4 work of senior officials -- senior Council officials who 5 were on the board to tie in what they were doing on the 6 arm's length company with what the Council's objectives 7 were. 8 Q. That's something you mentioned a while ago, that the 9 councillors sitting as board members, company board 10 members, would push for the objectives of the Council? 11 A. That would be my expectation. 12 Q. But I think you also recognised in your evidence that 13 when a person -- a councillor sitting as a director, 14 they must act in the interests of the company. 15 A. Yes. 16 Q. So they end up with -- someone sitting in that position 17 in a sense has two masters? 18 A. Yes. 19 Q. The interests of the Council on the one hand, the 20 objectives of the Council on the one hand and the 21 company interests on the other; and that seems ripe for 22 creating conflict, would you agree? 23 A. It can create conflict, and I can think of at least one 24 occasion where I've been on the board of a company, 25 where in assessing risk, I took a rather different 56 1 assessment of the risk in what was proposed to me on the 2 company board, as opposed to when that then became 3 a formal report to the Council, asking for permission 4 from the Council as shareholder to undertake a project, 5 where the risk -- the assessment of risk would be 6 different if you were looking at it from a public 7 funding point of view, as opposed to funding within 8 a company. 9 Q. But is that conflict and the possibility of that 10 conflict not a very good reason why you would be better 11 using the first method of keeping councillors informed, 12 that is officers enquiring and reporting, would be more 13 satisfactory than trying to put someone into the company 14 to carry out Council objectives? 15 A. Yes, it would, and both were in place, as I understand 16 it. 17 Q. But the first one doesn't seem to attract the 18 difficulties of these conflicts, whereas the second 19 does? 20 A. Indeed, and I would say it would now be good practice, 21 although we don't have this across the Council, my group 22 on the Council have now instituted this, where if we put 23 a member on the company board, it is not a member who 24 will be on the parent committee in the Council 25 scrutinising the work of that company. So there is 57 1 a separation there to allow them to act independently, 2 and to allow our members to fully scrutinise what 3 companies are doing without a conflict. 4 Q. The other thing you refer to, apart from pushing for the 5 objectives of the Council, was a question of reporting; 6 that the councillors sitting as directors would provide 7 another reporting line. Did I understand that 8 correctly? 9 A. That was very much an informal reporting line. So post 10 2007 my Conservative colleague Allan Jackson was 11 a member of the TIE Board, and the effect of that was 12 that he brought perhaps a more direct line for me and 13 other group members to ask questions of TIE officials, 14 and although he was at times bound by confidentiality, 15 to get an informal broader sense of what was going on 16 with the project. 17 Q. I just want to understand how that informal line worked. 18 You said on the one hand he would provide a line for you 19 to get to speak to TIE officials. Was that essentially 20 effecting an introduction between you on the one hand 21 and TIE officials on the other? 22 A. Yes. 23 Q. And it would be up to the TIE officials to determine 24 what information they would give to you? 25 A. Yes. 58 1 Q. But in terms of one of the -- your colleague councillor 2 sitting on the board, he's essentially providing company 3 information to you, someone in his group, political 4 group? 5 A. In part. He was very careful about what he provided. 6 Q. Careful in what way? 7 A. Careful in the sense that he certainly didn't leak to me 8 any private meetings of boards, private papers from 9 board meetings or minutes or anything like that. 10 Q. Because once again that is sort of raising another 11 potential conflict, isn't it? 12 A. Yes. 13 Q. On the one hand your desire for information and his 14 desire to co-operate with you, with on the other hand 15 the need to respect company confidentiality. So another 16 area of conflict arises. 17 A. Potentially. 18 Q. But it does arise in practice, doesn't it? You said he 19 has to be careful about what he's saying? 20 A. Yes, yes. 21 Q. That will arise -- you've been candid about the position 22 within your group. It will arise with any political 23 group whose councillor is on the board of a company? 24 A. Yes, it would. 25 Q. You mentioned there had been consideration in recent 59 1 years of the role of councillors sitting on the board of 2 companies. I would like to look at a report to Council 3 in relation to that. 4 It will be shown on the screen to your right. It's 5 document reference CEC02086791. We can see from the 6 front page here that it is a report to the whole Council 7 for 13 December 2012, simply entitled "Council 8 companies"? 9 A. Yes. 10 Q. If you go to the next page, please, we can just see the 11 summary: 12 "This report sets out officer recommendations 13 following a review of Council companies and the 14 proposals of the capital coalition working group of 15 elected members set up to consider the recommendations." 16 Do you recognise this report? 17 A. I do, having re-read it prior to the Inquiry, yes. 18 Q. Could we look at the next page again, please. 19 Sorry, one further page. 20 If we look at paragraph -- 1.4 to the foot of the 21 page, it would be easiest. 22 1.4 is: 23 "With these risks and challenges in mind, the 24 Director of Corporate Governance recently carried out 25 a review of the existing Council companies and 60 1 consultation with officers and elected members has taken 2 place over a number of months." 3 If you look at paragraph 1.5, you can see the 4 officer recommendations. Can we look at 1.5 and the 5 subparagraphs beneath. We can see that the -- as part 6 of the consultation process, the Director of Corporate 7 Governance made a number of recommendations. They 8 include -- the first one is that: 9 "Elected members should not be directly involved in 10 operational decision-making of Council companies. Given 11 the potential for conflict of interest between their 12 roles as councillors and as directors (where there is 13 a statutory duty to act in the best interests of the 14 company and not the shareholder), it is recommended that 15 elected members do not act as directors on company 16 boards, but carry out a strategic direction setting, 17 oversight and challenge role as members of the relevant 18 Council committees." 19 Were you aware of that recommendation or have you 20 reminded yourself of that recommendation? 21 A. I have been reminded of it by reading the report, yes. 22 Q. If we go to the next page of the document, 23 paragraph 2.1.1, you can see that: 24 "Elected members have indicated their wish to 25 participate directly in decision-making as directors of 61 1 the Council companies. It is proposed that (save as set 2 on out in paragraph 2.2.3) three elected members will 3 sit on the board of each Council company; one member 4 from each of the capital coalition groups and one from 5 an opposition group. It is recognised that the members 6 appointed should have the appropriate skills and 7 experience to be involved in the running of the company 8 in question. It is proposed that one of the councillor 9 directors should act as chair of the company. Officers 10 will not sit on the board of any Council company but one 11 officer from the appropriate service area will attend 12 the board meetings as an observer." 13 Essentially, the councillors have rejected the 14 recommendation from the Director of Corporate 15 Governance? 16 A. Well, my understanding, and it tells you in the report 17 it was a capital coalition working group that rejected 18 that, the capital coalition was Labour and SNP 19 councillors. 20 Q. Thank you very much. That was what I was coming to. It 21 wasn't a working group that you were involved in? 22 A. It wasn't a group that I was part of at all, and by that 23 period I was no longer Conservative Group Leader and so 24 wouldn't have expected to have been as involved with 25 discussions with the Director of Corporate Governance as 62 1 perhaps Councillor Balfour, then Councillor Balfour, who 2 I believe you are seeing. 3 Q. He's this afternoon. With in mind, but nonetheless with 4 your understanding of the issues arising out of these 5 companies, would you -- are you -- which of the two 6 views do you prefer? The councillors' view here, or the 7 working group view on the one hand, or the director's 8 view on the other? 9 A. Well, in some ways the director's view has a simplicity 10 about it. But I can understand why some elected members 11 wanted to retain a direct involvement because they would 12 feel that they could ensure they had an understanding of 13 the workings of the companies and whether or not they 14 were working in line with what the Council wished. 15 There's also -- so there were two amendments 16 submitted to this report, one of which asked for more 17 stuff to be brought in-house. That was not from my 18 group. My group proposed an amendment which accepted 19 most of the report but suggested that some of the 20 company structures be simplified so that there were 21 fewer companies. And therefore perhaps less options for 22 conflict. 23 My biggest concern over the years is that sometimes 24 the Council has appointed members to companies without 25 perhaps checking the necessary experience or skills and 63 1 appointing the best members to the appropriate 2 companies. And I think more could have been done about 3 that. 4 As I say, we've now taken a decision as a group that 5 we would make sure that the member who is a director of 6 the company is not a member who will be on the committee 7 that the company's results are reported to and the 8 committee that would be scrutinising the work of that 9 company, and that way we feel we've resolved that 10 conflict. 11 But that is not something that all political groups 12 on the Council have done. 13 Q. But in talking about the question of whether or not 14 some -- a councillor appointed brings the skills to 15 bear, that really requires that a view be taken of why 16 the Council is there. If they're there to really assist 17 the company, they are going to need to have a special 18 set of skills, aren't they? 19 A. Yes, although they may bring general non-executive 20 governance skills, as opposed to specific skills. 21 Q. If they are there -- if I may put it crudely -- to keep 22 an eye on the company and to try to carry the Council's 23 objectives, that's not necessarily going to require the 24 same skills? 25 A. It would require some of the same skills, but perhaps 64 1 not all. 2 Q. My Lord, I was going to -- 3 A. I think there are different views on this within the 4 Council, I would say. 5 Q. My Lord, I was going to move on to another matter. 6 I don't know if -- 7 CHAIR OF THE INQUIRY: We are going to break, Mr Whyte, to 8 give the shorthand writers some respite. So we will 9 resume again about 11.20. 10 A. Thank you. 11 (10.58 am) 12 (A short break) 13 (11.17 am) 14 CHAIR OF THE INQUIRY: You're still under oath. 15 MR LAKE: Thank you. My Lord. 16 Mr Whyte, I want to ask you a few questions about 17 the role of the Council in setting the strategy that 18 made the decisions in relation to the project. 19 Do you consider that there was sufficient chance to 20 properly consider those issues when they were brought 21 before the councillors to consider them? 22 A. There was in a sense that there were full reports made 23 to the Council on the overall strategy, and there were 24 opportunities for briefings, for private briefings for 25 political groups, and a chance to question and review 65 1 all of the information. 2 The one thing I would say was that was perhaps 3 missing was more opportunity to take things to 4 a committee of the Council, rather than always have the 5 reports to Full Council. 6 I say that because Full Council tends to be a very 7 formal meeting, where people take positions on the issue 8 before them and on the report before them. Generally 9 a Council administration will move the recommendations 10 in the report, and if you want to challenge anything, 11 you have to move an amendment at that point, and so the 12 administration's decision will be taken in advance and 13 the public decision-making will be about a debate on the 14 merits of the case. 15 At a committee there is much more opportunity to go 16 into the detail of matters. You can question the 17 officers at length and in public, in front of members of 18 the public, the media and others, and you can then test 19 the information they are giving you in a public way. 20 You can also use that information to help formulate 21 anything that you might move at that point to try to 22 have the recommendations altered or improved, and so in 23 a sense much of that work on the tram case was done in 24 private, I would say, throughout briefings and so on, 25 and for some of the early strategy, as an opposition 66 1 member, I would say we were simply presented with the 2 case, rather than having the opportunity to look at 3 alternatives in any great detail. 4 Q. Can I just clarify your answer. When you say that the 5 matter was done in private, that's in relation to the 6 broad strategy issues? 7 A. Yes. It was about briefings. So if the matter was 8 coming to Full Council, then each political group would 9 have a group meeting prior to Full Council, and there 10 would usually, for something major like trams, be 11 an opportunity for officers to come and brief each group 12 and for group members to ask questions of officers, to 13 supplement the information they had in writing in 14 Council papers. 15 But I would expect, and I'm talking about the early 16 stages, so you asked me about 2002 to 2006/2007-ish 17 before, when we were -- we were in opposition 18 throughout, but we were entirely in opposition in that 19 we didn't have anyone on TIE at that point, and we were 20 seen as opposing some of the major transport proposals 21 being put forward by the administration. 22 At that stage we very much simply got briefing and 23 papers prior to the Full Council. So about a week or 24 two weeks before. 25 At a later stage, once some decisions had been 67 1 taken, but as strategy developed, there was perhaps more 2 opportunity for us, because of a different attitude from 3 the coalition administration between 2007 and 2012, that 4 we perhaps had more access to officers, I would say, to 5 have regular updates and briefings during that period. 6 Q. This raises a question of how you got your information 7 and you have referred a number of times to briefings. 8 And access to officers. Do you consider that your group 9 in opposition had the same access to officers as other 10 groups in the Council? 11 A. I cannot say for certain because I don't know what 12 access all the other groups had. But I don't believe we 13 had as good access to information and officers prior to 14 2007. We certainly seemed to get more access after 15 that. 16 I would think that, from knowledge of the way the 17 Council operates, I believe the administration, the 18 Labour administration up to 2007, had more access to 19 information and officers and early work on proposing 20 strategy than we did. 21 Q. In terms of the briefings you were getting, your group 22 was getting on the tram project, were these briefings 23 scheduled to take place routinely or was it when 24 requested by you or other members of your group? 25 A. So that varied depending on the timeline of the project. 68 1 In the run-up to major decisions, and I would say right 2 up to the decision in early 2008 to proceed, then those 3 briefings tended to be a formal briefing prior to 4 a decision-making point at Council. 5 At a -- there were some additional background 6 briefings. I think in my statement I've mentioned 7 a trip to Dublin to learn from their experience and some 8 interaction with TIE at the time that Willie Gallagher 9 was Chief Executive, and there were some briefings 10 there, and they were more informal and were pretty much 11 interested members of my group who had asked to learn 12 more about the project, and so we were then given some 13 information. 14 Then later, once we'd got past the contract sign-off 15 point -- there was a mixture of things going on. I was 16 regularly briefed in any case as a Group Leader by 17 Tom Aitchison who was the Chief Executive on matters 18 that were coming to Council, or matters of interest to 19 the Council, and so he would keep me up to date, as he 20 saw it, with anything he felt was a development as 21 matters progressed. 22 So that was on at least a monthly basis, based on 23 Full Council meetings, and be about a week before the 24 Full Council meeting. 25 But there were also -- initially, fairly regular, 69 1 but it dropped off as there was nothing much new to tell 2 us each time, to maybe quarterly or maybe a bit further 3 apart, reports on progress as to how things were going. 4 Q. You were given reports on various matters that were 5 going to arise at Council meetings; yes? 6 A. Sorry? 7 Q. You were given Council reports prior -- so you were 8 given reports by Council officers prior to meetings on 9 issues that were going to be raised? 10 A. Yes. 11 Q. How important were these briefings to supplement those 12 reports and to fill in gaps? 13 A. They were very important because they were not only 14 an opportunity to supplement gaps or ask questions about 15 aspects not contained in the report. They were 16 an opportunity to question the officers, to check the 17 validity of the information they were providing us with. 18 Q. In view of their importance -- this is the briefings -- 19 does it occur to you that it might be strange that each 20 political group got their own briefings, so they weren't 21 necessarily getting all precisely the same information? 22 A. This is why I said to you in an earlier answer that 23 I believed it would be helpful if matters had gone to 24 a Council committee, because that would allow everyone 25 to have a chance to question officers and look at the 70 1 information in a public way, where everyone was getting 2 the same information. 3 Q. But that would just be the committee members? 4 A. That would just be the committee members, but we in 5 general, as the Council, have -- we cannot all take 6 a full interest in every single matter coming before the 7 Council, and we have committees and we trust that those 8 who are on those committees undertake the role on behalf 9 of the Full Council, as it were. 10 It's delegated to the committee. 11 So -- 12 CHAIR OF THE INQUIRY: Can other councillors who are not 13 members of the committee, could they sit in on 14 a committee hearing if they were interested in 15 a particular matter? 16 A. Yes, they could certainly sit in attendance at 17 a committee hearing. They may be able to take part also 18 if the matter related directly to their ward. So they 19 could bring up ward interest issues in the discussion 20 with officers at the start of the committee process. 21 CHAIR OF THE INQUIRY: And committee minutes presumably are 22 kept of what was asked. 23 A. Yes, they are, although your Lordship may know that 24 they're not all -- always detailed minutes. They are 25 very much a synopsis of the decision that was taken, 71 1 a bit like the Full Council minutes you will have seen 2 through the information submitted to you. 3 CHAIR OF THE INQUIRY: And are Council committee minutes 4 accessible to councillors who are not members of the -- 5 A. Yes, they are, and they're actually -- I think going 6 back, certainly to 2007, possibly a bit longer, they're 7 all available on the Council website, unless they are 8 a private session, in which -- but even then a synopsis 9 of the decision will be put up on the website. 10 CHAIR OF THE INQUIRY: Thank you. 11 MR LAKE: There's two things arising out of what you said. 12 One thing was it might be a matter -- certain matters 13 would be better considered at committee, rather than the 14 whole Council. 15 A. Yes. 16 Q. However, in terms of the large strategic decisions or 17 policy decisions, such as the decision to go ahead with 18 the tram project, is that a matter you consider would be 19 at committee or would that -- 20 A. So sometimes, and I can speak with experience of what 21 has happened in the last week or so, where there was 22 a discussion about continuing the proposal to undertake 23 a project to complete the line to Newhaven, that matter 24 has just recently been to the Council's Transport and 25 Environment Committee, but the committee took a decision 72 1 to move forward that will still have to go to Full 2 Council to be ratified, because of the scale of the 3 decision and the expenditure involved. 4 So in the sense that I'm saying the matter could go 5 to committee, it would not preclude it then going on to 6 Full Council, but it would allow an opportunity for 7 members to ask questions in public around something. 8 Q. The other matter that arises is, we started this 9 discussion on the question I posed regarding the 10 briefings to each group might result in differential 11 information from group to group? 12 A. Yes. 13 Q. You will be aware that after the Mar Hall mediation, the 14 Council set up an All Party Oversight Group whereby all 15 the parties attended, and were given the same briefing 16 at the same time. 17 Is that not a means by which it would be possible to 18 ensure that information was adequately and evenly 19 shared? 20 A. Yes, although having attended that -- those meetings as 21 a substitute on occasion, there were times when I asked 22 for further information at those meetings, and had to 23 receive that individually outwith the meeting 24 thereafter, because the officers didn't have it to hand 25 or whatever. 73 1 So there is still a possibility of additional 2 information only coming to some members who are 3 interested. 4 In terms of -- there was that group. 5 In terms of earlier in the project, there was 6 supposed to be a Tram Working Group of the Transport 7 Committee that would take some oversight of matters 8 reported by the Tram Reporting Officer and by the 9 Chief Executive. 10 For reasons which were never absolutely clear to me, 11 that -- and I think lie in the politics of the Council, 12 and are perhaps a matter that might be taken up with the 13 then administration, that group didn't seem to meet very 14 often or ever have many discussions in public that could 15 be accessed. 16 Q. If I could ask you, please, to look at page 17 of your 17 statement. What I'll do is identify a passage here and 18 then perhaps another couple of passages later which bear 19 upon the same issue. Then I can ask you to elaborate on 20 them. 21 If we look in the upper half of the page, if you 22 enlarge the upper half of the page, if I read the whole 23 of that paragraph: 24 "This is a very broad generalisation, but it is how 25 I felt. I would characterise the Labour administration 74 1 as not caring too much about the cost, so I do not think 2 they were pressing it in the same way that we were. 3 I do not think they were worried about that as much as 4 we were, and politically it is not in their way to do 5 that. So it meant that while there was a majority in 6 the Council who were in favour of delivering the 7 project, there was probably a lack of leadership to say 8 this is how we should deliver it, and I think that led 9 to a reduction in pressure on the officers at that stage 10 to deliver it appropriately and to keep TIE under some 11 control and accountable to the Council." 12 We will just consider this in isolation first of 13 all. I'm interested in the lack of leadership that you 14 talk about there. 15 Do I understand that is a lack of leadership on the 16 part of the Council as a whole? 17 A. So what I was trying to characterise there was what I've 18 seen in political life is a difference in view by some 19 in the Labour administration up until 2007, who were 20 about delivery of things, and less worried about 21 ultimately the cost to the taxpayer than -- it was very 22 much, in all the debates we had in my group internally, 23 an issue of if we were going to support this, because we 24 saw -- I think we had some debates in the group, but 25 I think on the whole, most of us saw the benefit in 75 1 transport terms. But some were very wary about the 2 cost, and we didn't hear or see any of that debate from 3 other groups within the Council. Particularly not from 4 probably, I would say, Andrew Burns who was Transport 5 Convener and then later Labour Leader. 6 Q. I'm concerned particularly with what you say there about 7 there was probably a lack of leadership to say: this is 8 how we should deliver it. 9 A. Yes. 10 Q. What did you think the Council could or should have been 11 deciding or saying, determining? 12 A. Well, with hindsight, and it is with hindsight, I would 13 have -- I'm a more experienced member of boards and of 14 the Council than I was back then, but I would have hoped 15 we would have possibly been given more delivery options 16 than we were in terms of how you might structure the 17 contract, whether you might seek a design and build 18 contract, for instance, rather than the segmented 19 contracts that proved to be the case that we got, and -- 20 Q. So you would have liked to see the Council involved in 21 at that level of detail, rather than that being handled 22 over in its entirety to TIE? 23 A. I think we should have had a business case that assessed 24 various options and allowed us to make decisions around 25 that, based on the evidence available. 76 1 CHAIR OF THE INQUIRY: The passage that you referred to 2 starts off with being a very broad generalisation. So 3 it was referring to the previous comments, and if you 4 look at the previous page, which is 16, that seems to be 5 dealing with this situation after the SLD and SNP 6 coalition came in? 7 A. Yes. 8 CHAIR OF THE INQUIRY: And you are pretty critical of that. 9 That's the context of that comment. You are saying that 10 both you and the Labour administration were concerned 11 about it, but on one hand, the Labour administration 12 weren't that bothered about cost? 13 A. They are more concerned about delivery than cost of 14 delivery. It's how I would characterise it from 15 watching them. 16 CHAIR OF THE INQUIRY: Yes. 17 MR LAKE: If you look at page 51 of your statement, 18 a different sort of leadership came up there. If we 19 could look at the last of the indented paragraphs, I'll 20 just read from the start: 21 "I think some in the administration also probably 22 felt gagged around the being held to ransom bit. I felt 23 in a difficult position because on the one hand TIE were 24 prosecuting all this, but there did not seem to be 25 anyone in the Council, whether that was the Chief 77 1 Executive or the administration's political leadership, 2 taking responsibility, ownership and leadership around 3 it." 4 What did you feel was lacking? 5 A. So from the point -- this was later on, and this was 6 under the Liberal Democrats/SNP administration, and by 7 that stage things were in a rather strange position 8 because the SNP had said they didn't support the trams, 9 but they were still part of the leadership of the 10 Council. 11 So there had been various break points and we were 12 post the point of the Princes Street issue, when the 13 street was closed and work didn't start and there was 14 a hiatus; and I had certainly felt at that period that 15 there was a role for the Council Leader, and the Council 16 Chief Executive to take some leadership and ownership 17 and attempt to resolve the disputes that were going on 18 and get work started, and to determine from the 19 contractors and from TIE how they could get them 20 together and get them back working together. 21 Q. You have already earlier in your evidence outlined the 22 rationale for having an arm's length company to have 23 skills and experience, but what you are saying, and you 24 say it in your statement -- you don't need to go to it, 25 I think, but at page 40, you consider that someone 78 1 should go to Germany and sort it out in Princes Street? 2 A. Yes, when nothing happened. 3 Q. Is that not taking control away from the company that 4 you had gone to all the expense of setting up? 5 A. We had set up a company to undertake specific tasks. If 6 it wasn't or didn't seem to be achieving those tasks, or 7 matters were moving in a way that didn't seem to be in 8 the interests of the city and the taxpayer, then as 9 shareholder, and as the body footing the bill, I would 10 still fully expect the Council to take an interest in 11 that and to take action on that. 12 Q. That would really require the Council to be involved in 13 the position of constantly monitoring what the company 14 was doing, to work out when it should step in and take 15 action? 16 A. Well, this -- in part there was supposed to be by 17 officers some relatively constant monitoring going on. 18 But in any case there was supposed to be regular points 19 where checks would be made on certainly financial spend 20 and project progress, and this was -- so arising from 21 the Princes Street issue, there was a very clear and 22 obvious situation that was obvious to anyone who walked 23 along Princes Street that no work was taking place. 24 So it was a matter not only about cost and 25 involvement. It was a matter of reputation for the 79 1 Council that it should be seen to be taking charge of 2 the situation. 3 Q. TIE were the party who were taking part in negotiation 4 of the contract and entering into it, and were 5 administering the contract with the contractor 6 consortium. Was it really going to help to have someone 7 else come from the political side of the Council, to 8 start trying to intervene in those contract discussions 9 at that stage? 10 A. What TIE were saying to us was that they were at an 11 impasse, and there was -- as I say, it was very public 12 and there was -- I had the feeling that the public of 13 Edinburgh saw that the Council had leadership and 14 ownership of this. And should therefore take action. 15 I also -- none of the issues that arose later and 16 became clear about the nature of the contract were 17 apparent at that stage. So it struck me that some of 18 this -- looking at it from the outside, some of this was 19 a relationship issue between some of the players and TIE 20 and some of the players in the consortium, and therefore 21 the way round that might be to get someone external to 22 that, but with an interest, and bearing in mind acting 23 on the interests of the taxpayer, to go in and see if 24 they could find a way to solve that dispute. 25 As it turned out, I suppose that's ultimately what 80 1 happened at Mar Hall, where the Council did take charge 2 of things, because progress wasn't taking place. 3 Q. Essentially at Mar Hall, TIE were moved to the side and 4 Sue Bruce took control of the TIE matter? 5 A. Yes. 6 Q. Turning to the question of provision of information to 7 you, I think you mention a couple of times in your 8 statement, you were told you mustn't discuss things or 9 you were restricted in disseminating information. Was 10 that information you had been given as Party Leader? 11 A. Yes. 12 Q. Did that not put you in a rather difficult position that 13 you were privy to information that you couldn't share 14 with other councillors who might be taking decisions on 15 matters relating to the tram? 16 A. Well, I felt that I had to keep my group colleagues 17 briefed and informed as much as I possibly could on 18 these matters, but I was put in a very difficult 19 position at times where TIE would accede to coming to 20 brief myself, and often Allan Jackson was present 21 because he was a TIE director, so already knew some of 22 the information. But they would ask that I did not pass 23 it on any further. 24 You would be given reassurances about some things, 25 and I was left in the position of at times having to 81 1 accept that information, and perhaps pass on reassurance 2 to colleagues that I didn't have the full information to 3 support and back up. 4 So yes, I was put in a very difficult position at 5 times. 6 Q. You said in your statement you adhered to the 7 requirements not to disseminate the information. You 8 indicated there you're not very happy. Was it beyond 9 being merely unhappy with the situation? 10 A. There were times when I -- so this varied through the 11 timeline of the project. As we continued, I think with 12 information that came out and situations that arose that 13 showed that some of the assurances we'd been given had 14 been false or partly false, then I became really quite 15 unhappy about it, but at an early stage, some of the 16 information seemed reasonable, and so I had to take it 17 on trust that people were giving me a full overview of 18 things; and I was conscious that, as some disputes 19 arose, that publicly airing those may cause a problem in 20 terms of any adjudications and so on. It was 21 commercially sensitive, and so in that sense I didn't 22 want to pass on too much -- if I was given indications 23 about costs or prices, I didn't want to pass on stuff 24 like that, that other group members may treat with less 25 confidentiality. 82 1 Q. You said you were aware of assurances that you'd been 2 given had been false. What were they? 3 A. Well, for instance, on utilities diversion, we were -- 4 it was reported quite regularly to us that a state of 5 completion of utilities diversion work, and ultimately, 6 and I can't remember the date, but my guess is it would 7 be about 2009-ish, maybe 2010, they started to report 8 that the utilities for the whole line were 95 per cent 9 complete. 10 Post Mar Hall it became clear that there were still 11 a great deal of utility conflicts between Haymarket and 12 York Place, and I've had it confirmed, or information 13 given to me more recently, saying there are something 14 like 1,200 utility conflicts still in the Leith Walk and 15 Newhaven section. 16 So that 95 per cent complete figure was obviously 17 inaccurate. 18 Q. When did you become aware of that? 19 A. With absolute clarity, once the Mar Hall situation had 20 taken place. 21 Q. What I was interested in was -- 22 A. But it seemed that the figures we were given on 23 utilities completion caused me some angst, and I did 24 continue to question TIE officials about them because we 25 were being given this figure of 95 per cent complete 83 1 that never seemed to move, and yet at the same time 2 there were still holes being dug in the streets, which 3 indicated that utilities work was ongoing. 4 Q. I can see that that might make you unhappy with the 5 information you had been given, its veracity. What I'm 6 really concerned about is the situation, were you being 7 given information that you were being told you weren't 8 allowed to pass on to your members, and that was causing 9 you unhappiness, that you knew your colleagues were 10 taking decisions without the information? 11 A. There was one particular occasion when that was -- that 12 I can point to that that was definitely the case, when 13 I had a briefing meeting with Richard Jeffrey and some 14 others from TIE and we discussed in detail where they 15 were with the adjudications of disputes. I asked 16 a considerable number of questions. I think it's been 17 suggested that TIE were saying they were winning the 18 adjudications. And when I probed that, I was told they 19 were winning but they weren't winning outright. 20 So, for instance, if there was a claim by the 21 contractor, and these figures are an illustration, they 22 are not an accurate figure, but the claim by the 23 contractor was GBP100,000, TIE disputed it and said 24 there should be no additional costs for the work done, 25 and the adjudication would come in at, say, GBP20,000 to 84 1 GBP30,000, then TIE would claim that as a win, because 2 they hadn't had to pay GBP100,000. 3 What my concern about that -- so I had two concerns 4 about that. One, I was told I could not discuss that 5 with anyone else, although -- 6 Q. Could not discuss what, sorry? 7 A. The detail of that, and the nature of how the 8 adjudication process had gone. 9 Q. Okay. You were told that by -- 10 A. I was told that by TIE officials. 11 Q. Including -- 12 A. Including the TIE Chief Executive. Because it may 13 prejudice future adjudications, was their reasoning. 14 Although I think I did discuss my concerns arising from 15 it with some other councillors, but those who would 16 already have an awareness, as I saw it. So I recall 17 speaking to Phil Wheeler about these issues at one 18 point, because he was the Convener of Transport and 19 a board member of TIE, in an effort to get, as I saw it, 20 the Lib Dems to take some more ownership and control, or 21 get the Chief Executive of the Council to take some more 22 ownership and control of the situation. 23 CHAIR OF THE INQUIRY: Did you think about speaking to the 24 Chief Executive? 25 A. I had spoken -- so the Chief Executive had become 85 1 strangely absent on tram issues by that stage in terms 2 of any briefings I had or discussions with him, and when 3 I asked for information that I could then raise, it 4 tended to come from TIE more directly, and they would be 5 supported by someone from city development in coming to 6 see me. 7 The issue was -- so I had partial information that 8 I couldn't then use to create a public issue, shall we 9 say. 10 MR LAKE: Do you consider that making that information -- 11 just sticking with the adjudication information -- 12 available to other councillors would have been of 13 assistance to those councillors in making decisions 14 regarding the trams? 15 A. I think it would have been of assistance to the whole 16 Council in allowing us to press -- we were in a stage 17 where we already had the contract and the adjudications 18 were a result of the way the contract was operating. So 19 I don't think we could have changed much about that by 20 that stage, but my impression was that, had we got to 21 a process like Mar Hall earlier, we could have saved 22 some of the additional costs that occurred, because 23 there was a lot of additional cost of the teams 24 involved, the legal teams and so on. 25 Q. Other than the adjudications, were there any other 86 1 categories of information you can recall that you were 2 told had to be kept confidential or that you were denied 3 access to because they were confidential? 4 A. I was denied access to counsel's opinion at one stage. 5 So TIE had sought counsel's opinion on their view of the 6 contract, and I was given a verbal briefing on that by 7 Richard Jeffrey, and the briefing was that they were 8 very secure in that the contract was fixed price, and 9 they could take forward into the adjudications and 10 prosecute on that, unless TIE had instructed changes 11 from the contractor and they claimed they were holding 12 those to a minimum. 13 I asked to see a copy of that opinion and I was 14 denied that. 15 Q. Can you think of any other particular categories of 16 information? 17 A. It's very difficult to pinpoint anything at this length 18 of time. I think I had -- my feeling is I had concerns 19 over a broad period of two or three years, and I raised 20 questions at different times. Sometimes with TIE 21 officers, sometimes even after Mar Hall with Council 22 officers, where I received information, but it was 23 either, as I saw it, incomplete or presented in a way 24 that didn't allow me to compare like with like or caused 25 me concern in another forms. 87 1 Q. Was that an awareness you had at the time or which has 2 emerged since? 3 A. Some of that I had an awareness at the time. 4 Q. Now, I think from the answers you have given already, 5 you would accept that there is need to keep some 6 information confidential for the interests of the 7 taxpayer? 8 A. Yes. 9 Q. I wonder then, do you have any ideas for how it -- you 10 can make a decision, what test to apply to determine 11 what has to be kept confidential and what doesn't and 12 who makes the decision? 13 A. Well, I have seen various methods of doing this in 14 public life. Some in the Council, some in other public 15 organisations, and the -- one of the things we do now in 16 the Council is we often have a data room where 17 commercially sensitive information is available to 18 councillors. You cannot take the information out of the 19 room but you can go and view it, and I think that is one 20 very good way of allowing the information to be shared 21 broadly, without releasing it to the public. 22 The other way of doing things is to set up a smaller 23 group who will look into something in detail and come 24 back and recommend a course of action. 25 Q. Were you aware that there was information leaked during 88 1 the course of the tram project and that TIE at least 2 considered it was detrimental to them? 3 A. Yes. Well, there seemed to be information leaked from 4 both sides. It was always difficult to determine the 5 veracity of that information. You asked how 6 decision-making should take place, so one of the 7 particular things I was concerned about when I asked 8 about the adjudications and, as I say, TIE were winning 9 partial victories, but there was additional cost, no one 10 seemed willing or able to indicate to me that -- how, if 11 the adjudications continued on a similar path, what 12 final figure of overspend we would be at, or how much it 13 was costing in delay, and therefore cost of time -- cost 14 in paying people while the delay took place around that 15 and where the project would ultimately get to. 16 I asked some of those questions because I was 17 conscious that when Princes Street work did start on 18 a cost plus basis, the contractor was paid an additional 19 amount, but when it was reported back to me, it didn't 20 seem a vastly additional amount, compared with what was 21 supposed to be the cost for the Infraco contract in 22 Princes Street. So it may have added 20 per cent or 23 something, when there were a lot of utilities conflicts 24 still in place. 25 So my concern at that point was how could we as 89 1 a Council or TIE, for that matter, who didn't seem to be 2 collating the information, get a view as to what point 3 it was more sensible to negotiate and come to 4 a conclusion around a different way of working, other 5 than to continue to rack up costs and legal fees and 6 other costs in the hope that you might get them back in 7 the long term. 8 Q. I want to turn now to ask a question about governance, 9 and I would like you to look at page 94 of your 10 statement, please. If we could look at the final 11 paragraph on the page. It's really the second half of 12 this paragraph I'm interested in, but I'll read the 13 whole of it for context: 14 "I think with hindsight some of the public 15 governance of the project within the Council was very 16 limited. Where there was a sub-committee, a tram 17 sub-committee or a transport committee, it did not meet 18 very often and it did not go into the detail." 19 I think you have already said that today in your 20 evidence as well: 21 "All of that was compressed into TIE or the Tram 22 Project Board. With hindsight I would want it to be 23 absolutely clear that the two things were different. 24 One was delivery and one was governance and oversight." 25 A. Yes. 90 1 Q. Now, what did you understand the respective roles of TIE 2 and the Tram Project Board to be in that regard? 3 A. Well, as I understood it from discussions with 4 colleagues, effectively the TIE Board and the Tram 5 Project Board became the one thing. They met 6 concurrently and they discussed the same issues. 7 I saw those -- if I think of project management 8 terms here -- as the operational delivery project board. 9 I saw a need for the Tram Sub-Committee or the Transport 10 Committee or some other forum within the Council, which 11 could be a governance board, which could then probe the 12 work that the project was undertaking and reporting 13 through its board, and hold that board to account for 14 delivery. 15 So one was a board concerned with delivery. The 16 other was about bringing governance and oversight to 17 that work. 18 Q. So you say essentially the oversight element had become 19 lost? 20 A. Yes. 21 Q. In terms of the approach to procurement now, you've 22 noted a number of places in your statement that there 23 were concerns within the Conservative Group as to the 24 cost of the project. What did you expect would be done 25 about that in the procurement strategy to try and avoid 91 1 it? 2 A. Well, I was -- so we are not conscious that we were at 3 any point given any options about what the procurement 4 strategy would be. But we were briefed, and I think my 5 recollection was that those decisions were taken early 6 under the Labour administration prior to 2007, and they 7 had agreed to go ahead with competitive dialogue with 8 a number of potential contracting consortia. 9 Our understanding from briefing from officers at the 10 time was that competitive dialogue would do two things. 11 It would get you to a final price that was your best 12 possible price by negotiating with a number of partners 13 who knew they were all negotiating and therefore keen to 14 have a price that you would accept and be the best. 15 But it would also get you benefits by encouraging 16 the various consortia to come forward with proposals 17 that might save cost, either on design or implementation 18 work that perhaps the traffic management around the 19 route or the order in which the route was built or 20 whatever, that they might be able to come up with 21 innovative solutions in that way. 22 So as a strategy, that was accepted by the Council. 23 Q. In terms of having control over the costs, you refer in 24 your statement to -- this would be relatively fixed. 25 A. Well -- 92 1 Q. I wonder what is meant by relatively fixed? 2 A. We were given an absolute assurance that this -- at the 3 point of contract signing, that this was a 95 per cent 4 fixed price contract. 5 So were there to be any risk elements, they were 6 small. They were within 5 per cent of the contract 7 price and they were on the side, assuming there were no 8 changes made. That was also with an assurance -- so the 9 point we got sign-off, it was 512 million for the 10 overall project, but each element of the project had its 11 own contingency built in within that as well. So there 12 was a great deal of assurance that by novating the rest 13 of the design work, that risk was passed to the 14 contractor; that we passed various other bits of risk to 15 the contractor in return for an increase in the 16 negotiated cost of GBP14 million over two tranches close 17 to contract sign-off, and that they were willing to take 18 on that risk. 19 That was presented very clearly to us in reports by 20 the Chief Executive. 21 Q. So that was -- when you refer to the GBP14 million, was 22 that the increase in price between the December price 23 and the final price in May when it was signed? 24 A. Yes. 25 Q. You understood that to be payment for -- 93 1 A. It was payment for -- it was presented to us directly as 2 a further transfer of risk, and also a willingness of 3 the contractor to mobilise appropriately and early to 4 keep us on timescale, because obviously there had been 5 an expectation that we gave the Chief Executive -- the 6 Council gave the Chief Executive the ability to sign off 7 the contract in December. There had been an expectation 8 that might be done in January, or at latest early 9 February, perhaps. This was obviously May, and that had 10 built in a delay, and part of the additional cost was 11 also to ensure early mobilisation to win back some of 12 that time. 13 Q. When you refer to the transfer of risk, did you -- was 14 it explained to you which risks had been transferred? 15 A. There was no specific explanation of that. These were 16 all very high level documents. 17 Q. I understand. I'd like to look at a different document 18 now. It's got reference CEC02083536. 19 We can see from the title page, it's said to be 20 a presentation by TIE, TEL and City of Edinburgh 21 Council, to the Council meeting that took place on 22 25 October 2007. 23 If we just go forward to the third page of this, we 24 can see under the heading "Background", under the 25 heading "June 2007", there's a reference to review of 94 1 the tram project by Audit Scotland and a couple of 2 quotations taken from that? 3 A. Yes. 4 Q. Did you attach any importance to the review that had 5 been carried out by Audit Scotland in June 2007? 6 A. Yes in the sense that it appeared to give the project 7 a clean bill of health, in terms of project management 8 and project strength. 9 Q. Looking to the foot of the page, we see the date, 10 September 2007, a reference to a further external audit 11 by the Office for Government Commerce, confirms project 12 status green. 13 Now, I think you have referred in your statement to 14 the fact that had you seen an earlier report which gave 15 it a red status, you would have had considerable 16 concerns? 17 A. I would have, yes. 18 Q. Here you are being told in a later report that it had 19 green status? 20 A. Yes. 21 Q. Did you place any reliance on that, and if so, what? 22 A. I don't recall. I'm not sure I recall this document. 23 I will have seen it at the time. 24 My recollection is twofold, that the things that 25 gave us some reassurance at that stage were that Audit 95 1 Scotland review and the fact that Transport Scotland 2 were still -- certainly until early 2007, were still 3 involved and were also still supportive of the project, 4 and were giving us indications, or it was reported to us 5 that they were happy with the project progress and the 6 project nature. 7 Q. We have finished with that document. 8 I want to jump forward then to the mediation which 9 took place at Mar Hall. And the Council voted there 10 should be a mediation at the end of 2010. 11 What input did the councillors have as to what would 12 be achieved or should be achieved at that mediation? 13 A. Certainly as an opposition councillor, I felt I had no 14 input. As I've said, you'll be speaking to 15 Jeremy Balfour later who was Leader by that stage, and 16 he may have more idea about what input others were 17 given. 18 When I was Group Leader, I was at times involved in 19 meetings of the group leaders where we were briefed and 20 our views were sought on some of these issues, or other 21 important issues to the Council. So Jeremy Balfour may 22 have more views on that at that stage. 23 Q. But you weren't involved in any consideration of what 24 might be achieved or what you would be looking for? 25 A. No; and indeed, I expressed discontent about that at the 96 1 time. I think I actually spoke in Council about it at 2 one stage. 3 Q. You note within your statement that -- for the record, 4 it's paragraph 55 -- that you had a concern that it's 5 not clear what the parameters of mediation were? 6 A. Yes. 7 Q. Do I take it that you would have welcomed the chance to 8 state what the objectives or the criteria were for 9 a settlement? 10 A. Yes. In my statement I have addressed other documents 11 that I was shown where I'd asked further questions about 12 the costs post mediation. Some of the way those costs 13 were derived were never satisfactorily explained to me. 14 My concern was that in places, despite the fact that 15 some work -- I know there had been delays, and there had 16 been issues with work ongoing. But despite the fact 17 that major elements of work had been undertaken, 18 including some of the larger infrastructure elements, so 19 bridges and so on, had already been undertaken, the cost 20 of the infrastructure bid, as far as I could tell, 21 seemed to be almost like restarting the project simply 22 to get to York Place rather than to build the whole 23 line. 24 Q. You note in your statement, for the record again, it's 25 page 84, that you had never been given what you term 97 1 a believable explanation of the huge increase in costs 2 post Mar Hall. When you say the costs post Mar Hall, is 3 that for the costs of the settlement that was achieved 4 at Mar Hall and subsequently built? 5 A. Yes. 6 Q. What were you looking for? What information were you 7 given about how the figures were arrived at? 8 A. There are some documents that I was given emails and so 9 on which I think -- 10 Q. I'm talking about emails you were given at the time when 11 the Council were being asked to vote on the outcome of 12 Mar Hall. What information were you given at that time 13 to satisfy yourself as to whether or not the deal was 14 one that should be approved? 15 A. Virtually nothing. It was a take it or leave it deal as 16 presented to us by Sue Bruce. 17 Q. Did you know -- I think there were two numbers, one for 18 completion to Haymarket and one for completion to 19 St Andrew Square, York Place? 20 A. Yes. 21 Q. Were you given an explanation of how those numbers were 22 made up? 23 A. No. 24 Q. Nonetheless, a vote was taken ultimately that it would 25 be completed to St Andrew Square and York Place? 98 1 A. Yes. 2 Q. On what basis were the Council able to take a decision 3 that that should be done, when they didn't know how the 4 cost of it was made up? 5 A. So that final decision at the second emergency meeting 6 was a very political decision, and I would characterise 7 it as being partly about the Council finding itself 8 a way out of a difficulty, and partly about pressure on 9 the Council from Government regarding the grant funding 10 that was available; because my understanding at that 11 stage, the way it was presented to us at least in 12 private, was that should we -- that Ministers were 13 unhappy with the vote that had taken place with the 14 decision to terminate at Haymarket, wished to see 15 a completion further through the city centre, and were 16 threatening to withdraw funding from the Council if we 17 didn't change that decision and build to 18 St Andrew Square/York Place. 19 So that would have been catastrophic for the 20 Council's finances. 21 MR LAKE: Thank you very much. I've got no further 22 questions. 23 Questions by CHAIR OF THE INQUIRY 24 CHAIR OF THE INQUIRY: Could I ask two things. I think you 25 mentioned one point that you had recently discovered 99 1 that there were of the order of 1,200 conflicts in 2 utilities in Leith Walk. When did you discover that? 3 A. That information has come to us as we've looked at the 4 Business Case information for what the Council is 5 calling the extension to Newhaven, what I would like to 6 call the completion to Newhaven. 7 CHAIR OF THE INQUIRY: So does that appear in the Business 8 Case that you've been given? 9 A. Yes. It's not just Leith Walk. It's the full section 10 to Newhaven from Picardy Place. 11 CHAIR OF THE INQUIRY: So if there had been, or if there was 12 any public perception that the extension or completion, 13 whichever word we use, was relatively straightforward in 14 that the utility work had been done and it was a case of 15 laying the track, that would be a false impression? 16 A. That would, on the information we've now been given as 17 councillors, be a false impression. 18 CHAIR OF THE INQUIRY: Another thing I want to ask you about 19 is that you say there was a delegation to the 20 Chief Executive to authorise TIE to sign the contract. 21 What, if anything, did you expect the 22 Chief Executive to do before being satisfied that the 23 contract met the objectives of the Council? 24 A. I expected him to work with his other senior officers 25 who were involved in this, so that would be the Director 100 1 of City Development, the Director of Finance, and the 2 Council Solicitor, to exercise due diligence to ensure 3 that TIE were signing something that was appropriate and 4 would meet the aims that the Council had asked the 5 company to achieve, and also I would have -- to some 6 extent I would have expected some of that work to have 7 been done prior to the delegation being given, because 8 he was reporting to us on risk and 95 per cent certainty 9 of price. So I would have expected that he would be 10 ensuring that what was being signed met with what he had 11 previously been presented and what he was presenting to 12 us. 13 CHAIR OF THE INQUIRY: So that's independent of any work 14 that TIE was doing, you would expect him to do work on 15 behalf of the Council; is that what you're saying? 16 A. That is correct. 17 CHAIR OF THE INQUIRY: There is a third point. A minor 18 point. I wonder if I could look at your statement, 19 please, at page 93. The top paragraph. That says: 20 "We have raised an action, but I fear that by the 21 time Lord Hardie finishes, there will be no corporate 22 memory to take that forward. It will be too late. That 23 is potentially financial but is also reputation, as the 24 Council seems unable or unwilling to fight for its 25 constituents." 101 1 Can I just understand what it is that you 2 understand. Are you saying that the action or actions 3 that have been raised by the Council cannot proceed? 4 A. They have been sisted, I believe, and my concern would 5 be that given what I've been told about availability of 6 information and the perhaps 6 million documents that 7 your Inquiry has and the ability to search that 8 information, and then in relation to that information 9 to -- so this specifically, I suppose, is about 10 an action against TIE's solicitors or those who were 11 advising. 12 I already fear that it is too late to gather the 13 information and make that stick, because most of the 14 people who were Council officers at the time and had the 15 knowledge and ability to take that forward have now left 16 the Council. 17 CHAIR OF THE INQUIRY: Are you aware that before the 18 preliminary hearing, some time before the preliminary 19 hearing, three actions were raised by the Council in 20 this regard, and they were sisted long before the 21 hearing? It may be that if any progress has been made 22 with these actions, it's been as a result of my comments 23 at the preliminary hearing; and if they're still sisted, 24 it's perhaps due to a lack of action by the Council in 25 progressing them. 102 1 A. Yes, I would say so. 2 CHAIR OF THE INQUIRY: Do you understand that there must 3 have been information before the Council to enable it to 4 raise this action, assuming it's behaving responsibly? 5 A. Yes. And I would have liked to have seen a more 6 proactive approach on some of that, because I felt that 7 the Council should be seen to be seeking redress for the 8 taxpayer where something has gone wrong in the project, 9 were there a liability elsewhere. 10 CHAIR OF THE INQUIRY: Thank you very much. I take it no 11 one has any questions? Thank you very much, Mr Whyte. 12 You're free to go. As I say, you're still liable to us 13 under your citation. You may be recalled. I hope that 14 won't be necessary. If it does prove necessary, 15 Ms Fraser will get in touch with you. 16 MR LAKE: My Lord, as Councillor Whyte indicated, the next 17 witness and the final witness for this week to give 18 evidence is Jeremy Balfour who is now a member of the 19 Scottish Parliament. 20 Now, unfortunately he's not available to give 21 evidence this morning, but there is an arrangement that 22 he will be here by about 1.30 or 1.45. In this 23 circumstance, I would suggest that we rise early and 24 perhaps resume slightly earlier than we normally would. 25 CHAIR OF THE INQUIRY: I think what we'll do is we'll rise 103 1 for lunch and resume again -- we will aim to resume 2 again at 1.40 and see if he's here, as long as people 3 understand that if he's not here by then, we may have to 4 have a short delay until he turns up. 5 (12.19 pm) 6 (The short adjournment) 7 (1.40 pm) 8 MR LAKE: My Lord, the next witness is Jeremy Balfour and he 9 is here. 10 MR JEREMY BALFOUR (sworn) 11 Examination by MR LAKE 12 CHAIR OF THE INQUIRY: As I have been saying to other 13 witnesses, Mr Balfour, if you just listen to the 14 question and answer it as concisely as possible. 15 MR LAKE: Could you state your full name, please. 16 A. Jeremy Ross Balfour. 17 Q. The Inquiry has details of your address. I think you 18 are currently a member for the Scottish Parliament? 19 A. That's correct. 20 Q. And have been since? 21 A. May last year. 22 Q. I think you were a councillor from 2005 and then you 23 were Conservative Group Leader between May 2010 and 24 May 2012? 25 A. That's correct. 104 1 Q. Then after that, you went on to be Convener of the 2 Governance, Risk and Best Value Committee? 3 A. That's correct. 4 Q. I would like you to have a look at a document, please. 5 You've got a hard copy in front of you. It will also be 6 shown on the screen. It's reference TRI00000016. 7 A. Yes. I've got it, yes. 8 Q. Is that a statement that you gave to this Inquiry? 9 A. That is correct. 10 Q. I think it should have your signature on the final page 11 of it? 12 A. Yes, I think so, yes. 13 Q. Are you content to adopt that as your evidence to this 14 Inquiry? 15 A. I am. 16 Q. I just want to ask you a few questions now about things 17 in that statement for clarification purposes. 18 I wondered if we could have up on screen the second page 19 of the statement. I would just like to look at a 20 reference which appears in a number of paragraphs. 21 Firstly, in paragraph 4. 22 We can see the final sentence of that is: 23 "I think if the information in respect of the tram 24 project had been accurate, then everything would have 25 been fine." 105 1 Do you see that? 2 A. I do, yes. 3 Q. Then so we can ask questions about them together, could 4 we also have the next page, please. If we could enlarge 5 6, 7 and 8. We can see the last sentence of paragraph 6 6 is: 7 "I think that it is fair to say we would have voted 8 differently if we had received more accurate information 9 about the project." 10 In paragraph 7, the third sentence beginning on the 11 third line is: 12 "In relation to the tram project, I do not think 13 that we were provided with accurate information from 14 City of Edinburgh Council and TIE officials." 15 In paragraph 8: 16 "Later on when I was the Party Leader, I think I was 17 deliberately mislead by certain individuals during tram 18 project meetings." 19 Now, there's clearly a theme running through those 20 of dissatisfaction with the information that was being 21 given. Were there particular aspects of the information 22 that you felt were inaccurate that led you to say that 23 had it been accurate, then everything would have been 24 fine? 25 A. I think what I meant by that is I think we would have 106 1 come to a very different conclusion and a different 2 place if that information had been provided to us. 3 I suppose if I can give two examples of that, to 4 perhaps explain what I mean. 5 I came in, in 2005 in a by-election. So the tram 6 project had already started. But in 2006 we had to 7 make, as a Full Council, the initial decision as to 8 whether we should go forward with the project, and there 9 was a briefing held for each political -- to group, and 10 obviously to ensure the group had that, where there were 11 senior officers from the City Council, members of TIE, 12 and we were given an opportunity at that point to ask 13 direct questions which were in the report and it was 14 a confidential briefing. 15 Looking back with hindsight, it's clear to me that 16 the information -- some of the information we were given 17 at that meeting was inaccurate and whether that was done 18 deliberately or whether that was done simply because we 19 just did not have the experience to be able to give that 20 advice, what will be an issue, I suspect, for this 21 Inquiry. 22 But I voted individually, and I think members of my 23 group, and I'm sure other councillors from other 24 parties, voted at that point on inaccurate information 25 that was given to us. 107 1 Q. What was the inaccurate information? What was the 2 inaccuracy? 3 A. Well, for example, one of the issues was obviously 4 contract v price, and one of the questions that one of 5 my colleagues asked, and it is one of the things you do 6 remember because of what happened later on, was: was it 7 a fixed price contract? So eg are we setting up -- this 8 is what we get, this is what we pay, and what came back 9 from a number of officers on that afternoon was: it's 10 80 per cent fixed. 11 So 80 per cent of what you get delivered was the 12 price you were going to pay. 13 Now, having the hindsight to look back at the 14 documentation and having a look at actually what then 15 occurred, clearly that wasn't the case, and so what we 16 were told about how the contract was set up, even before 17 we signed the contract, at that fairly early stage, from 18 my perspective, gave us an area where we would view that 19 we made decisions on that. 20 I suppose the other issue around that whole issue 21 was utilities, which was clearly going to be a massive 22 issue for the tram track. There was going to be 23 utilities, and again, we were given very clear steer by 24 those within the room who were giving the advice, was 25 that was all covered and the contingency fee was so high 108 1 that even if they found something like a World War II 2 bomb under Princes Street, that that would still be 3 within the contingency fee. 4 So I went away from that meeting and I think my 5 colleagues went away from that meeting of the view that 6 we had something that was going to be delivered 7 financially within the amount of money that we had been 8 given to us by Scottish Government. 9 Q. Now, when was that meeting, can you remember? 10 A. I cannot remember the exact date, but -- 11 Q. Can you remember when it was in relation to the contract 12 being signed, for example? 13 A. It was some time in 2006, when we were asked to make an 14 initial decision as to whether we should go forward. It 15 wasn't the signing -- the signing of the contract 16 happened a year later than that, but it was a fairly 17 major decision of this is the way that we are going 18 forward, as collectively as a Council. 19 I suppose -- 20 Q. Carry on. 21 A. I suppose the second example for me was when I became 22 Group Leader -- became Group Leader. The Council and 23 TIE set up what we called the Group Leader's Meeting, 24 which was held about every two to three weeks, which was 25 a confidential meeting where information was shared with 109 1 us which wasn't shared with the wider councillors 2 because we were group leaders. And I think two things 3 on reflection of that, is I'm not sure that is 4 a particularly helpful way to go forward, because you 5 are then one of four or five people that know something 6 that the others don't know, and I think it puts both you 7 and your colleagues in quite a difficult situation, how 8 much can you share with them. 9 But I think perhaps even more worrying for me was 10 that we were given handouts at each of these meetings 11 with this is where we are, this is the figures, all that 12 information. And from myself and from asking present 13 Council officers up to last year whether any of that 14 documentation was available, it's all disappeared, and 15 I think, well, I know now that there was inaccurate 16 information given to us at those Group Leaders' 17 meetings. 18 Again, I think if we had been given what I would say 19 were the true statements, then we as Group Leaders and 20 then subsequently perhaps our groups, and as a Council, 21 would have made different decisions. 22 Q. Who was giving you this information? 23 A. It was senior Council officers and senior members from 24 TIE. 25 Q. Can you recall who? 110 1 A. Well, I think probably the one that gave us the most 2 information from TIE perspective was Richard Jeffrey, 3 and then it was the Chief Executive and the Head of 4 Director of Finance within Edinburgh City Council. 5 Q. Can you recall what the inaccurate information was or 6 what the information concerned that you thought was 7 inaccurate? 8 A. At that point we were into dispute resolution on bits of 9 the contract, and we were being told that by and large 10 we were being successful in regard to those dispute 11 resolutions, that the majority of us -- the majority of 12 them were going our way, and the ones that weren't going 13 our way were so minimal that we were insignificant 14 towards the overall project. 15 Now, clearly as things panned out and when we got to 16 the situation where the contract -- the work stopped, 17 that clearly wasn't the case, and actually looking at 18 documentation previous to that, even at the time, that 19 wasn't accurate information. 20 I think the whole question around how much money had 21 been spent, how much of the utilities had been done, all 22 those areas -- and particularly round risk, were 23 minimised and not given us as Group Leaders, and I think 24 also probably spokesmen on transport inaccurate 25 information. 111 1 Q. In terms of the Council officers, were you aware what 2 information they were being given by TIE? In other 3 words, were they simply repeating what they had been 4 told or were they in a position to form their own view? 5 A. I mean, I'm not absolutely certain in regard to that 6 because I don't know what Council, senior Council 7 officers know. 8 I do know that one senior Council officer said to me 9 subsequent to this, he was at that point not a senior, 10 but he was in the meetings, and he said to me he knew 11 the information that we were being given at that time 12 was inaccurate. 13 Q. Who said that? 14 A. It was Mr Maclean, Alastair Maclean, who at that point 15 was Head of Legal. He did not tell me that at the time. 16 He told me that subsequently, and clearly you can 17 explore that with him at the appropriate time. 18 But from his perspective, he was head of legal, so 19 he was not there as a senior officer. He was there to 20 give legal advice to the Council, but he was of the view 21 that information was given to us that was inaccurate and 22 he felt unable to counter that because he was not 23 a senior officer at that time. 24 So he must have known something more than we as 25 councillors knew. 112 1 Q. In terms of the subject matter -- before I go to that, 2 in terms of things were being said by representatives 3 from TIE, were you aware whether they were voicing their 4 opinion or relaying legal advice that they had had? 5 A. The impression they gave to me was that this was their 6 opinion and that this was their view on the project. So 7 it wasn't -- they were clearly aware of what was going 8 on and where the different dispute resolutions were 9 going on. And they -- it was not them saying this is 10 what our lawyers are saying. It was very much the 11 senior members of the TIE group, including 12 Richard Jeffrey, who were saying: this is my opinion, 13 this is my view. 14 Q. When I asked you about the subject matters of the 15 information, you've referred to the dispute resolution 16 procedures that were going on, utilities, the completion 17 of utilities, and risk. 18 Were there other matters? 19 A. I think obviously the cost, I think, was the other one, 20 how much of the money had we spent, and were we in 21 danger of going over budget. 22 Again, at that stage, when I was Group Leader, we 23 were still being told that this project was going to be 24 delivered within the framework, because of the 25 contingency fees that had been written in or allegedly 113 1 written into this. 2 Q. That's going to the time when you said that you were the 3 Conservative Group Leader. 4 Going back to the earlier stages, talking about the 5 year before the decision to go ahead, did you consider 6 that there was inaccuracy in the information then? If 7 so, to what did it relate? 8 A. I think in regard to how the contract was set up, 9 I think the whole area in regard to liability, ongoing 10 liability around that contract, again, and I won't name 11 individuals because they were junior members of the 12 legal team, who came in subsequent to all of this, their 13 view was that the original contract we had was mince, to 14 use their words -- 15 Q. I think that's referred to in your statement. In your 16 statement you do name the person? 17 A. In that case I'm -- try not to always name the people. 18 But again, in my view, if that was a person who had 19 expert in contract law, saying that about a contract, 20 then clearly it was not what we had been sold to as 21 elected members. 22 Q. It may seem a fairly obvious matter, but had you been 23 given different information, what difference would it 24 have made in practice? 25 A. Well, we would have voted a different way. I see 114 1 Council as a wee bit like non-executive directors of 2 a company. We are not there to do day-to-day 3 management. In fact, we don't have that responsibility. 4 We are there to make strategic key decisions on 5 information provided to us in regard to what City of 6 Edinburgh Council should do, and we come to a view, with 7 political consideration around that, to what is the best 8 for the city. 9 I think if we had had the information, accurate 10 information, back in 2006, back in 2007, I can't talk 11 for the rest of my colleagues, but I would have made 12 a very different decision and I'm convinced that the 13 majority of my group, if not all of my group, would have 14 made a different decision. 15 Q. I want to ask you some questions briefly about the 16 governance aspects. You do record in your statement 17 that you don't believe that the roles and 18 responsibilities of each of the main stakeholders were 19 sufficiently clear. 20 Bearing that in mind -- the page reference for that, 21 if you want it, is page 22, paragraph 65. 22 A. Yes. 23 Q. Now, I'm really -- notwithstanding that concern on your 24 part, nonetheless, I wonder, did you have a view of what 25 the respective roles were of TIE on the one hand and the 115 1 Tram Project Board on the other? 2 A. I mean, I think my own view was that TIE was there to 3 deliver the tram project as an arm's length company on 4 behalf of the Council. 5 I think where the other parties all fit in never 6 became particularly clear to me. So I think the Tram 7 Board -- I never quite understood what its absolute role 8 was, and I think that, as I say, I think in one of my 9 opening sentences of that paragraph, is that the model 10 became very complicated. It wasn't a clear -- I suppose 11 there was two ways we could have done this. We could 12 have said to a completely arm's length company -- arm's 13 length company: here is the money, you deliver the tram 14 for us, and get on and do it. Or we could have had 15 councillors on that, or not councillors on that. Or we 16 could have delivered it in-house. 17 I think what we ended up with was a hybrid of both 18 of those things. So we had councillors, Council 19 officers, we had TIE, we had other people all having 20 a role in it, and thus there was not a clear 21 understanding of where the ultimate decisions were going 22 to be made. 23 The ultimate decision ultimately was obviously the 24 58 councillors. But the day-to-day decisions and the 25 information sharing, I think, got lost in that 116 1 structure. 2 Q. That's what I was going to ask. 3 Again, by reference to that paragraph, you actually 4 say there: 5 "Ultimately it was the 58 councillors who made the 6 decisions and who were responsible for them." 7 That's the decisions. 8 But which decisions did you expect would be made by 9 the Council and which would be the role of TIE? 10 A. Well, I think that's where I go back to my kind of 11 non-executive directorship model; that the key 12 decisions, signing off of the contract, the big 13 decisions in regard to making that, are made by the 14 councillors. 15 The decisions in regard to how it is working out day 16 by day, how it is managed day by day, that, it was the 17 responsibility for TIE. 18 Q. If we look then at the following paragraph, it's 19 paragraph 66, on page 23, reading a little bit above 20 halfway down that paragraph, there's a sentence that 21 begins at the right-hand margin: 22 "On reflection, I think the Council should have let 23 these companies deal with the construction of the trams 24 and report back when it was completed." 25 That gives the impression of a very hands-off 117 1 approach. But if I could also ask you to look at 2 paragraph 68, you feel that the Council members and 3 officers should have been more involved in the tram 4 project. 5 I'm trying to square this circle. On the one hand 6 it should have been left to the company, on the other 7 hand the officers and members should have been more 8 involved? 9 A. I think in regard to paragraph 66, that is in hindsight, 10 this is what should have happened. So if I went back 11 and we were starting all over again, and maybe this is 12 a lesson if we are going to build a tram further down 13 into Leith, is that that is a model that may be the 14 best, that councillors are not involved. They say: we 15 want a tram built from X to Y, this is your budget, you 16 go away and deliver it. 17 And then the Council is simply -- step back from 18 that process. A wee bit like, on a smaller scale, 19 building a new school. We say: we want a new school in 20 this area, this is your budget. We put it out to 21 procurement. Someone takes it on and builds that 22 school. 23 We are not involved in the analysis or scrutiny of 24 that unless it dramatically goes wrong. So that I think 25 for me is a better model. 118 1 Whether you have councillors on that arm's length 2 company or not is, I think, a debatable issue. 3 Where we were though, and in regard to paragraph 68, 4 was that we didn't have that. We clearly had political 5 oversight of this project. Clearly the Council Leader, 6 the Convener of Transport, was -- were getting more 7 information than even group leaders and even certainly 8 the average backbench councillor. 9 I think it was then their responsibility, with that 10 information that they had, now, whether that information 11 was accurate or not, only they can speak to. But with 12 that information, they should have then been much more 13 into the project. 14 So if I can give an example, when Princes Street 15 closed down, I think it would be fair to say my view 16 would have been was that the Council Leader, along with 17 the Chief Executive of the Council, should have been on 18 a plane across to Germany, to have a head-to-head 19 meeting with them within 24 hours to say: let's get this 20 resolved. 21 Q. It might be thought that is slightly in tension with the 22 idea that a company has been set up to deliver the 23 project. It's entered into contracts. There was 24 a contractual dispute -- emerges. And you are saying 25 that at that stage the Council should immediately 119 1 intervene. That seems to be the exact opposite of 2 letting the company get on with it? 3 A. The company wasn't delivering and the company wasn't 4 doing that, and at that point, not only was the 5 contractual issue being faced, but we were facing the 6 closing down of the main thoroughfare within Edinburgh, 7 with all the difficulties that involved for the bus 8 company, all the difficulties that involved for small 9 businesses, big businesses, the city centre, and the 10 surrounding areas, and so that is where I think 11 a political leadership does need to take place, because 12 at that point we are not just looking at the building of 13 a tram. We're looking at a knock-on effect for many of 14 our local residents. 15 And as it was set up, there was room for political 16 involvement in that, and that is where I think the model 17 that we had set ourselves up with meant that the Council 18 Leader and the Chief Executive should have been much 19 more actively involved, rather than just saying: we are 20 going to leave that to TIE. I think that was missing 21 the responsibility of what they were going to do. 22 Q. If we pick up the suggestion from your paragraph 66 that 23 the Council should let companies deal with the 24 construction of the trams and report back when 25 completed, what you say should have been done, the 120 1 opposite extreme, that would put the Council in 2 a position where it wasn't really in a position to 3 intervene, when there's a dispute about a major road, 4 blocks a major road? 5 A. I do accept, and that is a risk. If you go down that 6 particular model. 7 I think for me, the advantage of that model is that 8 you then don't have the party politics, the day-to-day 9 politics, the pressure that is put on local councillors, 10 to do that, and hopefully you've then got a professional 11 set-up which can deliver. 12 But I accept that does not come without risk, and 13 I think whenever you're setting up a project like this, 14 there are going to be swings and roundabouts, there are 15 going to be benefits and disadvantages. 16 From my perspective, the advantages outweigh the 17 disadvantages of handing it over completely. 18 I think what we didn't do, we handed it over, but 19 kept half a hand on it. 20 Q. Can I ask you about the opposite end of the spectrum 21 then, where the Council retain it in-house. Essentially 22 the way the tram project was finished off after 2010. 23 Do you have any comments on that as a model for 24 implementing this sort of project? 25 A. I think it is absolutely possible and clearly we did 121 1 that. But we did that only because we were very 2 fortunate that we had, probably more by accident than by 3 great planning, to be honest, the right people in place 4 at that time. 5 We had a new Chief Executive who spent hours and 6 hours having that hands-on involvement. You know, she 7 built the relationships with, if you like, the other 8 side. She did that trip, as I was saying, to Germany. 9 She did all that, and I think we were very fortunate to 10 have that individual. We were very fortunate, I think, 11 to have Alastair Maclean with his experience on 12 contractual law and his legal background there to give 13 us advice. 14 I think one of the things which I think was quite 15 reassuring for me was that we had somebody who also 16 recognised their own limitations. And so when we 17 realised there was something that we needed, say, legal 18 advice on, rather than trying to come up with it 19 themselves, although it cost extra money, they went to 20 either a senior QC or they went to a firm in London or 21 wherever, to get that advice, which I think was far more 22 robust. 23 So I think it is possible to do it in-house, but it 24 will only work if you have the appropriate talent and 25 expertise and in my view, within 32 local authorities, 122 1 you're never going to be able to find that. 2 Q. Not something that even if it wasn't full-time officers 3 of the Council would be available as you discussed 4 taking external legal advice, it could be external 5 engineers or whatever. It's advice that could be 6 bought? 7 A. It is, and it's obviously what we did forward. Unwind 8 and then rewind it back up again, that is the way we 9 went forward. 10 It is a possible model and I think it is one that 11 can work, but I still think you need two or three key 12 drivers at the leadership level for that, and we were 13 very fortunate to have Sue Bruce and to have 14 Alastair Maclean and their respective senior officers 15 around that, who I think did that. 16 Whether other officers could have done that, 17 I simply don't know. 18 Q. Going back to the idea of using an external company, to 19 what extent do you still need those key people with the 20 insight and the drive to make it work, even if you're 21 using an external company? 22 A. Clearly you do. I just don't think you need the same 23 level of drive or same level of expertise. 24 I think the other issue is around the other 25 organisations involved, is people are -- it was 123 1 interesting, I was sitting on a bus still even recently 2 when two people behind me were saying to me: how could 3 the councillors ever have reached that decision? 4 And I nearly turned round and gave them a half an hour 5 lecture, but resisted that. 6 It wasn't just TIE. It wasn't just Council officers 7 that were giving us the positive signs. Transport 8 Scotland on one or two occasions, Audit Scotland, gave 9 us reports to say: this is a project that you can 10 support. And I suppose I go back to my non-executive. 11 Non-executives cannot be experts on every area within 12 a company that they serve. All they can do is take the 13 best advice that they are given and weigh that advice 14 and come to a decision. 15 If the advice that we are given is inaccurate or 16 wrong, then that is clearly going to make it difficult. 17 But I think for us, the backstop was always 18 Transport Scotland and Audit Scotland not saying: hang 19 on, don't go ahead with this. And if they had done 20 that, clearly we would have had to come to a very 21 different view on it. 22 Q. We know there was an Audit Scotland report carried out 23 at the request of the Scottish Government in mid-2007. 24 Is that the one you're referring to? 25 A. Yes. 124 1 Q. What did you take from that? What reliance did you 2 place on that? 3 A. Heavy reliance. There was an independent third party 4 expert who had been set up by Scottish Government, 5 because after all -- money was, who did not say, even 6 back in 2007: do not go ahead with this project. 7 So if you like, that was -- because I think it was 8 clear that within each political group, there was quite 9 a lot of questions and concern even back in 2005/2006, 10 and certainly by 2007. 11 But the issue was we were being told by constituents 12 or maybe being told by other people, you know, things 13 could go wrong here. Things are going wrong here. This 14 is not set up. But I think we did rely on Audit 15 Scotland's report because that was seen to be 16 independent and neutral in that they had no political 17 slant one way or the other. 18 Q. What about Transport Scotland? What was it that they 19 did or didn't do that is relevant to your consideration? 20 A. Again, I can't remember the exact date, but they also 21 produced a report on the tram project, and again, 22 I think they came out and said the same thing, that they 23 were content for the project to go ahead. 24 Q. They were significant funders of the project? 25 A. Well, yes. They are the agency the Scottish Government 125 1 use to spend their money on these type of issues, yes. 2 Q. Did you attach significance to the fact that 3 Transport Scotland was willing to invest the 4 GBP500 million that they were? 5 A. Yes. I mean, again, you would have -- again, this was 6 a -- it's independent to some degree from the Scottish 7 Government. It's certainly independent from the 8 Council. If they had put red flags up at that point, 9 again, I think different decisions would have been made. 10 Q. Were you aware of reports on the project produced by the 11 Office of Government Commerce? 12 A. I wasn't, no. 13 Q. You mentioned a little while ago, when you were talking 14 about the remote companies, irrespective of whether or 15 not they had councillors sitting on the boards, and 16 I think in your statement you expressed some doubt about 17 the advantages of that, putting councillors on the 18 boards of these companies. 19 A. Yes. I mean, I have sat on a number of -- when I was 20 a councillor, I have sat on a number of arm's length 21 companies set up by the Council, and again, I think it's 22 a judgment call company by company for me. I think in 23 some cases it can have benefit. In some cases it can't. 24 Clearly when you're an individual sitting on 25 a board, you sit there to represent the best interests 126 1 of that company at that time, and that is made very 2 clear to you as a councillor. But you come as 3 a councillor with constituents, with political views, 4 with all of that, and that -- however clever you want to 5 be at trying to separate those two, inevitably it must 6 influence your thinking in some way when you're making 7 those decisions. 8 Certainly from my experience, you are never neutral 9 on an issue of importance within an arm's length 10 company. 11 I think there's often quite a lot of consensus among 12 councillors on it, and often their views may be 13 different, forgetting the political parties, to that of 14 the other people who make up the board who maybe don't 15 come from a local government background. 16 Q. Does that not present conflict? On the one hand you are 17 there to represent the interests of the company. On the 18 other hand you have all these other interests, political 19 or constituent, pressing in on you for your attention. 20 Is it possible to serve both? 21 A. I think it is possible. I would like to think on 22 a number of occasions I have been able to do that. 23 I think as long as you recognise that, but I think 24 whoever you are, if you're going on to be 25 a non-executive director of any company, you come with 127 1 some form of other interest, other baggage and it's no 2 different from being a councillor. 3 I think it has to be acknowledged, and you yourself 4 have to be aware, whenever you're making a decision, 5 that you're not being influenced, over-influenced, by 6 one or other interest. 7 Q. What do you think are the advantages of putting 8 councillors on boards? 9 A. I think they come with a wide knowledge of a city, and 10 where the city is going and what the city wants. 11 I think they come as people who are very used to 12 having to make difficult decisions. I think they are 13 used to having to read lots of reports and being able to 14 then ask appropriate questions. And so I think there is 15 an expertise you build up. 16 I was a councillor for just on 11 years, but a skill 17 set that you build up which I think I didn't have when 18 I went in, in 2005, but I do have now, because of how 19 you work as a councillor within the City Chambers. 20 Q. What about passing information or relaying information 21 about the company's activities back to the Council? Do 22 you think they have a proper role in that regard? 23 A. Well, I think there's a very clear understanding that, 24 as I said earlier, when you are a director of whichever 25 company you are sitting on at the time, that is your 128 1 responsibility, and with that comes confidentiality. 2 So if something is discussed within that 3 confidentially, there was a clear understanding, both 4 legally and given to you by officers, that that was then 5 not to be shared with your group or with other Council 6 officers. 7 Q. Does that not create a difficult situation in the 8 Council Chamber, that one or two councillors are sitting 9 there with the knowledge that's not shared by the rest 10 of their colleagues when they come to take difficult 11 decisions? 12 A. Yes, it can do, and that is one of the realities of 13 being a local councillor. I think that's why, you know, 14 I think that is always going to be -- unless everybody 15 has everything, there are going to be people who have 16 more information. 17 Sometimes you will say to your group: I'm going to 18 vote differently than you; or I'm going to say to the 19 company: I agree with exactly what you are doing, but 20 because of my political party, I'm going to vote 21 a different way. 22 Again, it's not a clean, easy simple thing to 23 explain and put down on one page of A4. It comes with 24 experience. But ultimately, you have to understand when 25 you're in a particular meeting at a particular time, who 129 1 are you responsible to, and for. 2 Q. So I think you said earlier that you might get briefings 3 as a Council leader that you -- you were told were 4 confidential and therefore you wouldn't be able to pass 5 them on to your group members? 6 A. Yes. 7 Q. So you could have a situation where someone has 8 information because they are the leader that the others 9 don't. Someone else might have information because 10 they're sitting on a board that others don't, and we 11 have a kaleidoscope of different knowledge levels, all 12 trying to take one decision? 13 A. Yes, and that's why I think -- 14 Q. Is that satisfactory? 15 A. That's why I think, as I said previously, it probably 16 isn't satisfactory. And that's why I'm not -- I think 17 there are not just in regard to the tram project, but in 18 regard to often issues that come up within the Council, 19 where there is either confidentiality, or there's 20 a public issue that a small number of councillors will 21 be briefed more than others. So, for example, the 22 Council leader or the convener of a certain area will be 23 briefed far more by officers than a backbencher who is 24 not involved in that particular area. 25 That is how councils work. That's why I think for 130 1 me, remodelling this and giving it over to an arm's 2 length company where there isn't that political 3 involvement on balance is probably the best way forward, 4 rather than bringing it in-house, even if you've got 5 very capable people of delivering that. 6 Q. Returning to the question of the directors on the 7 companies, I would like you to look at a document with 8 me. It will be shown on the screen. It's reference 9 CEC02086791. You can see that this is a report for 10 a Council meeting on 13 December 2012. It's titled 11 "Council companies", and that the author of the report 12 or the signatory is Alastair Maclean, then the Director 13 of Corporate Governance? 14 A. Yes. 15 Q. Could we look to the third page of this, please. Sorry, 16 one further page on. 17 If we look, there's a background statement in 18 paragraph 1.3: 19 "It is also important that the Council is clear 20 about the anticipated benefits from using an arm's 21 length company to deliver services, rather than 22 retaining service delivery in-house or contracting or 23 partnering directly with a third party provider in the 24 public, private or voluntary sector. In some cases, an 25 arm's length company can offer financial benefits, for 131 1 example charitable companies currently qualify for 2 Business Rates Relief. In other cases the rationale for 3 a separate corporate vehicle may be less clear. In 4 order to ensure optimal and efficient delivery of 5 services and Council objectives, it is important that 6 the overall company structure is rationalised." 7 Now, that question, whether or not there should be 8 an extra company, is that something which in your 9 experience gets the attention it needs? 10 A. I think it gets the attention it needs within perhaps 11 the more anoraks of us in regard to these type of 12 issues. So I think when I was on the governance risk 13 and best value committee, when I was on the old audit 14 committee, when I chaired the Governance Risk and Audit 15 Committee, those type of issues did start to become more 16 important to us. 17 I think there was an ongoing debate within political 18 groups and within the Council itself in regard to what 19 is the best way forward. 20 But I think 1.3 is a good summary of where we were 21 and to some extent where we still are, or where the 22 Council still is. 23 Q. Could we then enlarge paragraph 1.5 and its 24 subparagraph. 25 We can see here that what we are looking at is 132 1 recommendations that have been made by the Director of 2 Corporate Governance, and the first one is that: 3 "Elected members should not be directly involved in 4 operational decision-making of Council companies. Given 5 the potential for conflict of interest between their 6 roles as councillors and as directors (where there is 7 a statutory duty to act in the best interests of the 8 company and not the shareholder), it is recommended that 9 the elected members do not act as directors on company 10 boards, but carry out a strategic direction setting, 11 oversight and challenge role as members of the relevant 12 Council committees." 13 Now, I take it from what you said, that is something 14 you would disagree with? 15 A. Yes. I think in some cases that's right. But I think 16 that the reality is that there does need to be and 17 actually there's a benefit of having elected members on 18 some of the Council arm's length companies. 19 Q. Is that just for the reasons you have already outlined 20 for me this afternoon? 21 A. Yes. And I think also there are again when I was 22 a councillor, I was either Trustee or Director, 23 depending on the make-up of the third sector charity, of 24 third sector organisations within Edinburgh. So, again, 25 I went into a voluntary organisation as a local 133 1 councillor. That's why I was invited on. But I then 2 have to put the best interests of that local charity 3 when I was sitting as a trustee. 4 So I would be quite concerned if we were going to 5 say councillors, because they are councillors, cannot be 6 involved in either local community groups, local 7 charities, even bigger charities, because I think they 8 bring an expertise that others within the city don't 9 have. 10 Q. I think you are talking there about companies that are 11 either owned as charities or are owned by third parties, 12 not companies owned by the Council? 13 A. No, but I think the principle for both of them actually 14 are -- I think if you took that 1.5.1, literally, for 15 me, logically, you would then have to say local 16 councillors shouldn't be involved in local third sector 17 charities, either because the same operational 18 decision-making issues could come into conflict with -- 19 with the role of a councillor and I think Edinburgh and 20 any other local authority would suffer from that. 21 So I think it's too broad a statement, 1.5.1 for me 22 to agree to. 23 CHAIR OF THE INQUIRY: In that last example of the 24 councillor being on a charity or a company that was 25 a charity, there wouldn't be the same risk of conflict 134 1 because presumably at any meeting discussing an issue 2 relating to that charity, the elected member would 3 declare an interest. 4 A. Yes, but if you declare a non-financial interest, you 5 are still able to make a decision at a Council meeting. 6 So, for example, when we set the budget in February, 7 the first 15 minutes of the Council meeting is when 8 every councillor stands up and declares a non-financial 9 interest in all the third sector organisations that they 10 are involved in. They still vote on whether we put the 11 budget through or not. 12 So if I'm a director of a small charity that gets 13 GBP20,000 from the Council, that GBP20,000 in 14 a 1 billion budget is nothing, but for that charity is 15 very important. 16 So there is arguably still a conflict of interest if 17 you then try to -- I don't think my colleagues do this, 18 but try to manipulate it so they get their 20,000 when 19 they maybe don't deserve it. 20 So I think even there there is still a possible 21 conflict in regard to that. 22 I think it's only if you have a financial interest 23 that you are then not able to vote on an issue. 24 CHAIR OF THE INQUIRY: Thank you. 25 MR LAKE: Mr Balfour, I was going to move on to a slightly 135 1 different issue now. I'm finished with that document on 2 screen. 3 If it's possible to return to your statement and 4 look at paragraph 40 of that. That's on page 13? 5 A. I've got it. 6 Q. You set out there your understanding in May 2008 that 7 the consortium, Bilfinger Berger Siemens, bore the risk 8 of incomplete design and utility work diversions: 9 "I believed at that time the infrastructure was at 10 least an 89 per cent fixed price contract." 11 Where did your understanding of these matters come 12 from? 13 A. From questions that we asked to senior Council officers 14 and to members of TIE. 15 Q. Were these in briefing sessions? 16 A. For the whole group, yes. 17 Q. For the whole group. 18 Are any written records ever kept of what is said 19 during these briefing sessions? 20 A. No. There is normally a PowerPoint presentation or 21 a piece of -- a bunch of paper that is put round. On 22 occasions each group is -- has staff, Council staff that 23 help them and a senior member of them may take notes so 24 that they can refer back to when we're discussing it 25 later on as a group. But there's no formal minute taken 136 1 of private briefings. 2 Q. In terms of obtaining information in briefings or 3 otherwise, were there occasions when you were told you 4 simply wouldn't be given it because of reasons of 5 confidentiality? 6 A. Yes. I think that word that you learned more often than 7 not in these briefings was commercial confidentiality. 8 I have to say, I used to challenge that, because, you 9 know, we are ultimately responsible. To say that that 10 information can't be shared with councillors because of 11 confidentiality, I think shows disrespect to 12 councillors. 13 Now, I appreciate the decision senior officers have, 14 that some politicians do leak information. And 15 I understand that. But ultimately we are the person 16 that's got to make that decision, and if we are not 17 being given absolutely everything, how can we make 18 a proper decision? 19 For my position, officers, when they either didn't 20 want to answer a question or didn't want the answer to 21 come out, the stock phrase was "confidentiality, 22 commercial confidentiality". I think for me that was 23 a let-out that we perhaps in retrospect should have 24 challenged more often. 25 But ultimately the officers either give you the 137 1 information or they don't. 2 Q. What happened when you challenged it? 3 A. We were told -- I was told that: of course we trust you 4 never to leak any information, but there are leaks; the 5 Evening News has its sources; it is getting its 6 information from somewhere; it's clearly coming from one 7 of the 58. 8 I actually think that's an over-simplification. 9 I think there were officers at different levels of the 10 project that were also briefing the Evening News and 11 other papers at the same time. 12 So I think to think all leaks that came about the 13 tram was one of the 58, was officers trying to make them 14 feel better when actually it wasn't the reality. 15 I'm not denying that some councillors did leak 16 information at some point. Clearly that must have 17 occurred, but so were others, and I think to use that as 18 an excuse is not acceptable, and there has to be some 19 way of punishing a councillor if he's found to be doing 20 that, rather than making the rest of -- the overwhelming 21 majority of councillors who are keeping that information 22 confidential in the dark. 23 Q. That assumes you could find who the councillor was that 24 made the leak? 25 A. That's true. And that is a challenge. But that is also 138 1 true where officers leak. 2 Q. Do you accept -- from what you're saying, it sounds like 3 you don't accept that there should be any claims of 4 confidentiality, commercial confidentiality for passing 5 information to councillors? 6 A. No, I feel that had been overused by Council officers, 7 and I think -- I suppose the compromise they got to 8 later on, not just with this project, but with other 9 projects subsequently, was when we set up a data room 10 where all the data was there, but -- and you could go in 11 and examine it, but you couldn't take away your notes or 12 anything like that. 13 That may well be an acceptable compromise where, if 14 you do want to delve and dig down to get very detailed 15 information, you have that opportunity and then you also 16 have the appropriate officer there to answer your 17 questions, because, again, you know, as far as I'm 18 aware, out of the 58 councillors that, for example, 19 signed off the contract, I don't think any of us would 20 claim to be contractual law experts. 21 There were lawyers within the Council as 22 councillors, but I don't think anyone would claim to 23 have been a contract expert. So you have to have 24 someone there to guide you and to answer your questions, 25 however layman they are. 139 1 Q. In terms of use of the data rooms, tell me if this is 2 something you can't say. Are you aware, has it been 3 successful? Have they been successful in preventing 4 leaks? 5 A. I think they have. As far as I'm aware, and again 6 I can't absolutely say, but my understanding is that 7 certainly the number of leaks that have occurred on 8 other projects when databases have been used has been 9 very little, if at all. 10 Q. Presumably the difficulty with the tram project was that 11 it was of such sensitivity, politically and otherwise? 12 A. Yes, and also there was such amount of information. To 13 put it in one room at one time and expect someone to 14 have the energy to go able to read every document and 15 then never -- is just unrealistic. 16 Clearly, you could go back on in, but sometimes, you 17 know, you do ... 18 So I think with the amount of information that was 19 being given, there needed to be a different way of doing 20 it and explanation, because, you know, you can read 21 a document, but you do need someone who's got the 22 expertise to be able to talk you through some of the 23 more technical stuff, particularly in regard to 24 engineering stuff. 25 Q. I want to turn then right to the very end of the 140 1 contract when matters went to mediation in 2011. 2 Now, I think it's something that you say in your 3 statement, that you were concerned that you were not 4 asked for any input as to the objectives of the 5 mediation. Do I understand that correctly? 6 A. That's correct. 7 Q. Were you asked for any views or any input, any 8 parameters at all? 9 A. To my recollection, no. 10 Q. What sort of things do you think it would have been 11 useful for you individually or councillors generally to 12 have had an input on at that stage? 13 A. This is where I'm going to slightly contradict myself 14 because we are where we are at that point. 15 Q. Yes. 16 A. So I don't want to take this as a kind of this is what 17 I would necessarily do in the future, but where we were 18 at that point, I think group leaders and the transport 19 spokesman should have been put into a room with the 20 Chief Executive and the other appropriate officers who 21 were going away to negotiate, and given some kind of 22 parameters as to say: this is what would be acceptable 23 to us in regard to time, cost, other areas. Because 24 what came back was a document that we either had to say 25 yes to or no to, and if we had said no to it, what would 141 1 have happened at that point? 2 So it was almost -- actually I think what we did 3 ultimately negotiate was a reasonably good package, and 4 it did work and it got us to where we want to get to. 5 But, again, as a councillor, you were put into 6 a situation where you were said: either accept this or 7 reject it, and I'm not sure that, from a kind of 8 non-executive role, policy decision role, was 9 acceptable. 10 If the Chief Executive had come back and said, 11 "I have negotiated a great deal and the tram will be 12 ready in 2021, you have to accept that", what would we 13 have done? That's an extreme example and we would have 14 voted no, but if it had been on the margins, it would 15 have left us in a very difficult position. 16 That is where I think you do need some kind of -- 17 when it got to the stage where it was a political 18 decision where it was being brought back in-house, where 19 TIE were being substituted out of the game 20 predominantly, at that point we needed to have some kind 21 of scrutiny to say: this is what is acceptable within 22 these parameters we can live with this, but if you go 23 beyond the parameters, come back to us. 24 So, for example, they were there for, whatever it 25 was, 72 hours. Now, I don't know whether the Council 142 1 Leader was briefed in those 72 hours, but as far as I'm 2 aware, no one within other groups or within other 3 spokesmanships was given any briefing of how it was 4 going. 5 Again, it's almost as if officers are thinking: we 6 are making the decision. Well, they are not. They 7 bring a proposal. Councillors vote for something or 8 against something. 9 Q. It was always clear that the Council officers, the 10 Chief Executive of the Council, wasn't going to be 11 signing anything during the course of the mediation. 12 I think that was understood, wasn't it? 13 A. It was understood, but it was either take it or leave 14 it. She came back and said, "I have negotiated this 15 package. You can either accept it or in theory you can 16 reject it". 17 Q. Is it fair to say you were given in essence four options 18 back to the Council, which is: carry on regardless, 19 terminate the contract, run the line to Haymarket for 20 one price or run the line to St Andrew Square/York 21 Square for another price? 22 A. Yes, but we weren't given any options within those four 23 options. We were given -- I think what I would have 24 wanted was some form of political input in regard to 25 those four options. 143 1 Q. What sort of input? 2 A. Well, I think parameters to say: okay, if we are going 3 to go to St Andrew Square or if we are going to go and 4 terminate the contract or whatever, here are some of the 5 areas that we would be looking for you to negotiate on. 6 Here are some of the timescales we would be looking to 7 negotiate on, et cetera. 8 So we were given options, but I don't think there 9 was any input in regard to how it was going. Again, 10 from my recollection, we were given no indication how it 11 was going on. So 58 councillors knew as much as anybody 12 else within Edinburgh during that period. 13 Q. Was there not a danger with 58 councillors you would get 14 58 slightly different views as to what should be 15 achieved in the meditation? 16 A. Well, that's why I think -- and again I appreciate it 17 goes slightly against what I said previously -- you 18 probably at that point did need to use political party 19 leaders to say, "Here is the steer", and for them to 20 have gone to their groups and said, "What are the key 21 issues for us as a political group?" and to feed them. 22 Now, they may or may not have come back with 23 anything different. I'm not saying that. I'm saying we 24 came back with what we came back. But I think it's more 25 in regard to the perception of who is ultimately in 144 1 charge at that point. Is it senior officers who are 2 ultimately in charge or is it local councillors as 3 a Council who make a decision? 4 I think there was too much of a movement to give too 5 much to senior officers and away from we, as 6 councillors, have been elected to make these decisions, 7 it is our ultimate responsibility. 8 Q. I appreciate it's difficult and we don't know quite what 9 guidance would have been given to the Chief Executive, 10 but with political guidance, even if it could be 11 distilled into some general cohesive guidelines, how 12 practicable do you think it would have been for a Chief 13 Executive to go in and try and mediate with that in the 14 background? 15 A. Well, ultimately she would have had to come up with the 16 best deal that she could have come up with, and she did 17 that. 18 What I'm saying is I think the perception was there 19 was no role for the elected body to have any input into 20 that. I think, for me, that moves power too much away 21 from our responsibility to that of senior officers. 22 Q. In terms of the role that the councillors did have then, 23 which is determining which one of the options should be 24 pursued, to what extent were you given an explanation of 25 how the figures for going to either Haymarket or 145 1 St Andrew Square were arrived at? 2 A. We were briefed by the Chief Executive, 3 Alastair Maclean, and other senior members of their team 4 before that Council meeting made the decision. 5 Q. And did they tell you how they got to the particular 6 figure and what it represented, or were you just told 7 that's the figure? 8 A. In absolute honesty, I can't remember that to give you 9 a direct answer. 10 Q. Were you ultimately satisfied that these figures were 11 appropriate and that the Council should agree to them in 12 order to complete the line? 13 A. Yes. I mean, I think I had confidence in both the 14 Chief Executive and her team that they were not trying 15 to pull the wool over our eyes in regard to anything 16 that we were producing. I was satisfied at that point 17 that this was -- that the figures did, by and large, 18 come out as they were going to come out. 19 MR LAKE: Thank you, Mr Balfour. Those are my only 20 questions. 21 Thank you, my Lord. 22 Questions by CHAIR OF THE INQUIRY 23 CHAIR OF THE INQUIRY: Just one point, Mr Balfour. 24 You said that Mr Maclean told you that he knew that 25 the information that was being given to you was 146 1 inaccurate, but not at the time, but some time later. 2 When was that? 3 A. Again, my Lord, I can't give you the exact time, but he 4 at that point had moved from being just Head of Legal to 5 being a Director in Edinburgh City Council. So it was 6 probably -- again, I wouldn't want to put a specific 7 date on it, and it was in a conversation -- I mean, 8 clearly, within the City Chambers there were lots of 9 conversations that go on at lots of times, and there was 10 lots of analysis of what went wrong, what went right, 11 et cetera, and it was in one of those conversations, at 12 the time confidential, and I've kept it confidential 13 until this Inquiry, that he gave me that information. 14 CHAIR OF THE INQUIRY: You're a solicitor yourself; is that 15 correct? 16 A. Well, I was for a very short period of time. 17 CHAIR OF THE INQUIRY: Were you surprised that the Council 18 Solicitor felt unable to step in and say to even the 19 Chief Executive that's not accurate information? 20 A. My understanding is -- and I'm sure you can ask 21 Mr Maclean, he's a very able man, to explain for 22 himself. My recollection was that he had challenged 23 senior officers in regard to the information that we 24 were being given at that time and was told to shut up 25 and that wasn't his role. 147 1 So I think he fulfilled his role as Head of Legal to 2 pass that information on to his superiors, but he was 3 told not to share that directly with other elected 4 members. 5 CHAIR OF THE INQUIRY: Thank you very much. You are free to 6 go, Mr Balfour. 7 You're still under your citation. It may be we will 8 have to recall you, but I'm hoping not. If that 9 happens, Ms Fraser will be in touch with you. 10 Thank you very much for your time. 11 A. Thank you, my Lord. 12 (The witness withdrew) 13 MR LAKE: My Lord, I have no further witnesses available for 14 the Inquiry today. It is intended that we'll be moving 15 on next week to what could be seen as a different 16 chapter of evidence within the Inquiry with witnesses 17 from the Council, I think starting with Duncan Fraser 18 and my colleague Euan Mackenzie QC will be leading the 19 evidence with those witnesses. 20 CHAIR OF THE INQUIRY: Thank you very much. We will adjourn 21 until next Tuesday. 22 (2.43 pm) 23 (The hearing adjourned until Tuesday, 12 September 2017 at 24 9.30 am) 25 148 1 INDEX 2 PAGE 3 MR DONALD ANDERSON (continued) .......................1 4 5 Examination by MR LAKE ........................1 6 7 Examination by MR FAIRLEY. ...................18 8 9 MR IAIN WHYTE (sworn) ...............................44 10 11 Examination by MR LAKE .......................44 12 13 Questions by CHAIR OF THE INQUIRY ............99 14 15 MR JEREMY BALFOUR (sworn) ..........................104 16 17 Examination by MR LAKE ......................104 18 19 Questions by CHAIR OF THE INQUIRY ...........146 20 21 22 23 24 25 149